Question

Cox, North, and Lee form a partnership. Cox contributes $201,000, North contributes $167,500, and Lee contributes $301,500. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $182,000 for its first year, what amount of income is credited to Lee's capital account

Answer 1

Lee's portion of income =$81, 900

Step-by-step explanation:

The income or loss would be shared according to the ratio of capital contributed. The ratio is the proportion of capital contribute per partner to the total pool of capital.

Lee;s portion of income

= lees capital/total capital × reported income

= 301,500/(201,000+167,500+ 301,500) × 182,000

= $81, 900

Lee's portion of income =$81, 900