Question

The partnership of X and Y shares profits and losses in the ratio of 60 percent to X and 40 percent to Y. For the year 20X8, partnership net income was double X's withdrawals. Assume X's beginning capital balance was $80,000, and ending capital balance (after closing) was $140,000. Partnership net income for the year was:

A. $120,000.
B. $300,000.
C. $500,000.
D. $600,000.

Answer 1

D. $ 600,000

Step-by-step explanation:

if X's withdrawals = y

Net Income = 2y

X 's share of profit = 2y ×60%

= 1.2 y

X's Closing capital + X's withdrawals = Opening Capital + Share of Net income

$ 140000 + y = $ 80000 + 1.2y

1.2y - y = $ 140000 - $ 80000

= $60000

0.20y = $ 60000

y = $ 300000

Therefore,

Net Income = 2y

= 2×300000

= $ 600000