Question

Fox, Greg, and Howe are partners with average capital balances during 20X1 of $120,000, $60,000, and $40,000, respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of $30,000 to Fox and $20,000 to Howe, the residual profit or loss is divided equally. In 20X1 the partnership sustained a $33,000 loss before interest and salaries to partners. By what amount should Fox's capital account change?

A. $7,000 increase
B. $11,000 decrease
C. $35,000 decrease
D. $42,000 increase

Answer 1

A. $7,000 increase

Step-by-step explanation:

-33,000

-30,000

-20,000

-12,000

-6,000

-,4000

-105,000

Distribute equally betwne partner: (35,000)

FOX:

30,000 salary + 12,000 interest - 35,000 los distribution = 7,000 increase