Jake and Nellie are partners with beginning capital balances of $30,000 and $20,

Question

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

Explanation / Answer

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

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