Smith, West, and Krug Form a Partnership

question 31

Multiple Choice

Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $175,000 for its first year, what amount of income is credited to Smith's capital account?

• A) $43,750.
• B) $78,750.
• C) $52,500.
• D) $58,333.
• E) $60,000.

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Definitions:

Social Responsibility

The duty of businesses and individuals to act in the best interests of society and the environment.

Stakeholders

Customers, investors, employees, and public affected by or with an interest in a company.

Profits

Net income obtained from a business's operations after subtracting expenses from revenue.

Ethical Development

The process of enhancing and enriching one’s understanding and practice of ethical standards in personal and professional contexts.