David, Chris and John Started Off a Partnership Firm on July

question 60

Multiple Choice

David, Chris and John started off a partnership firm on July 31, 2014. They decided to share profits equally, but also inserted a clause in the partnership agreement whereby any loss suffered would be borne in the ratio 3:2:1. For the year ended December 31, 2014, the firm earned a net income of $45,000. However, for the year ended December 31, 2015, the firm incurred a loss of $60,000. Assuming that John had an initial capital contribution of $40,000 and made no further withdrawals, what is the balance of John's Capital account as of December 31, 2015? (Assume that none of the partners made any further contributions to their capital accounts.)

• A)$45,000
• B)$40,000
• C)$55,000
• D)$35,000

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Definitions:

Pencil Sharpeners

Devices used to sharpen pencils by shaving away their worn surfaces.

Total Surplus

The combined benefit to all parties involved in a transaction, equal to the sum of consumer and producer surplus.

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Machines for cleaning dishes and utensils automatically.