Question

The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year was $264,000. The articles of partnership make no reference to the division of net income.

Based on this information, the statement of partners' equity would show what amount as total capital for the partnership on December 31?

a.$52,000

b.$164,000

c.$216,000

d.$380,000

Answer 1

Partners' equity as at December 31 is $380,000

Step-by-step explanation:

The total capital for the partnership on December 31 can be computed beginning with the capital account balances as at January 1,thereafter adding newly invested funds and net income for the year as well as deducting withdrawals made by partners in the year as shown below:

opening capital balances ($160,000+$110,000) $270,000

Harrison invested funds $20,000

Withdrawals from the business($96,000+$78,000) ($174,000)

Net income $264,000

Partners' equity as at December 31 $380,000

This figure would be opening partners' equity next year