Cox,North,and Lee form a partnership.Cox contributes $180,000,North contributes $150,000,and Lee contributes $270,000.Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally.If the partnership reports income of $174,000 for its first year,what amount of income is credited to Lee's capital account?
A)$58,000.
B)$57,000.
C)$61,500.
D)$55,500.
E)$48,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the interest allowance for each partner. 
- Cox: $180,000 x 5% = $9,000 
- North: $150,000 x 5% = $7,500 
- Lee: $270,000 x 5% = $13,500

Next, we need to calculate the total interest allowance: 
$9,000 + $7,500 + $13,500 = $30,000

We subtract the total interest allowance from the total income: 
$174,000 - $30,000 = $144,000

The remaining income of $144,000 is allocated equally among the partners: 
$144,000 / 3 = $48,000

Finally, we add the interest allowance to each partner's share of income: 
- Cox: $9,000 + $48,000 = $57,000 
- North: $7,500 + $48,000 = $55,500 
- Lee: $13,500 + $48,000 = $61,500

Therefore, the amount of income credited to Lee's capital account is $61,500.

Cox,North,and Lee Form a Partnership