Homework SourseJake and Nellie are partners with beginning capital balances
| Jake and Nellie are partners with beginning capital balances of $30,000 and $20,000 | ||||||
| respectively. Jack is allocated a salary of $50,000 and Nellie $20,000. If the partners | ||||||
| capital balances at the end of the year are $$85,000 and $45,000, the partnership must | ||||||
| have had earned net income of: | ||||||
| A | 70,000 | |||||
| B | 80,000 | |||||
| C | 130,000 | |||||
| D | 60,000 |
| Jake and Nellie are partners with beginning capital balances of $30,000 and $20,000 | ||||||
| respectively. Jack is allocated a salary of $50,000 and Nellie $20,000. If the partners | ||||||
| capital balances at the end of the year are $$85,000 and $45,000, the partnership must | ||||||
| have had earned net income of: | ||||||
| A | 70,000 | |||||
| B | 80,000 | |||||
| C | 130,000 | |||||
| D | 60,000 |
Solution
Net income = final capital - starting capital
Jake’s starting capital = $ 30000
Nellie’s starting Capital= $ 20000
So total initial Capital = 30000 + 20000= $ 50,000
Expenditure:
Jake salary= $ 50,000
Nellie Salary = $ 20,000
Total Expenditure = 50,000 + 20, 000 = $ 70,000
Year end capital
Jake‘s final capital = $ 85,000
Nellie’s final capital = $ 45,000
Total year End Capital = 85,000 + 45,000 = $ 130,000
To find net income we will plug values in above formula.
Net income = 130,000 – 50,000 = $ 80,000
