Farrell and Jimmy enter into a partnership agreement on May 1, 2018. Farrell contributes $30,000 and Jimmy contributes $140,000 as their capital contributions. They decide to share profits and losses in the ratio of their respective capital account balances. The net income for the year ended December 31, 2018 is $40,000. Which of the following amounts should be credited to Jimmy's capital account? (Do not round any intermediate calculations. Round your final answers to the nearest dollar.)
round any intermediate calculations. Round your final answers to the nearest dollar.)
A) $70,000
B) $40,000
C) $32,941
D) $7059
C) $32,941
Allocation based on capital balances uses the ratio of the partner's capital balance to the
total capital. In this case, Total Capital = $170,000 ($140,000 + $30,000)
Jimmy's Capital balance = $140,000
Income allocated to Jimmy = ($140,000 / $170,000) × $40,000 = $32,941
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