The closing balance on Partner K's current account is $4 650 credit. What is Partner K's share of residual profit?
Question 1 Report
The closing balance on Partner K's current account is $4 650 credit. What is Partner K's share of residual profit?
Answer Details
The correct answer is $7 000.
The current account must balance. Total debit side items: drawings $19 000 + interest on drawings $950 + balance c/d $4 650 = $24 600.
The account must balance, so total credits = $24 600.
Total credit side items: balance b/d $2 600 + interest on capital $5 000 + salary $10 000 + share of profit = $24 600.
$17 600 + share of profit = $24 600
Share of profit = $24 600 - $17 600 = $7 000.
$8 000 results from omitting the opening balance. $5 200 or $6 200 arise from arithmetic errors such as adding the interest on drawings to the credit side or miscalculating the closing balance.
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