Question

Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000, respectively. The partnership generated net income of $30,000. What is Saturn's capital balance after closing the revenue and expense accounts to the capital accounts?a. $127,500b. $112,500c. $102,500d. $120,000

Answer 1

$127,500

Step-by-step explanation:

In business, when the income statements which is a statement that show the expenses and revenue is closed at at the end of the year, it is closed into the owner's equity for a corporation and into the capital account for a partnership with the net income for the years shared amongst partners and posted to their capital accounts individually.

Hence, Saturn's share of the net income for the year

= 1/(1+3) * $30,000

= 1/4 * $30,000

= $7,500

Saturn's capital balance after closing the revenue and expense accounts to the capital accounts

= $7,500 + $120,000

= $127,500