Simon and Keith have a profit and loss sharing agreement where: (1) salaries of $30 000 each are credited, (2) 6% interest is allowed on capital balances (3) the remaining profit or loss is split 75-25, respectively. At the end of the year, before the distribution of profits or losses, capital account balances were $40 000 for Simon and $20 000 for Keith. There was a profit of $50 000 before distributions to the partners. What is Keith's year-end capital account balance assuming capital balances are adjusted to reflect profits and losses?
A) $47 800
B) $54 600
C) $62 200
D) $82 600

Question

Quizplus · Accepted Answer

Explanation:Keith's capital account balance before profit distribution = $20,000Interest on capital = $20,000 * 6% = $1,200Keith's share of profit = $50,000 * 25% = $12,500Keith's year-end capital account balance = $20,000 + $1,200 + $12,500 = $33,700

Simon and Keith Have a Profit and Loss Sharing Agreement