Q1. Seth and Beth have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $42,000 is allocated to Seth?
a. $20,000
b. $0
c. $32,000
d. $23,000
Q2. Rex and Kelsey are partners who share income in the ratio of 3:2. Their capital balances are $95,000 and $140,000, respectively, on January 1. The partnership generated net income of $40,000 for the year. What is Rex's capital balance after closing the revenue and expense accounts to the capital accounts?
a. $146,000
b. $111,000
c. $71,000
d. $119,000