The Net Income Agreement for Crosby and Stills States Net

question 84

Multiple Choice

The net income agreement for Crosby and Stills states net income and net loss shall be divided in a ratio of 4:6,respectively.The net loss for the current year is $50,000.On January 1 of the current year,the capital balances were as follows: Crosby,$55,000; and Stills,$65,000.During the current year Crosby withdrew $40,000 and Stills withdrew $25,000.Compute the capital balances as of December 31 of the current year.

• A) \[\begin{array} { | c | c | }
• \hline \text { Crosby, capital } & \text { Stills, capital } \\
• \hline \text { debit of } \$ 5,000 & \text { credit of } \$ 10,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | c | }
• \hline \text { Crosby, capital } & \text { Stills, capital } \\
• \hline \text { credit of } \$ 35,000 & \text { credit of } \$ 70,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | c | }
• \hline \text { Crosby, capital } & \text { Stills, capital } \\
• \hline \text { credit of } \$ 5,000 & \text { credit of } \$ 10,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | c | }
• \hline \text { Crosby, capital } & \text { Stills, capital } \\
• \hline \text { debit of } \$ 35,000 & \text { credit of } \$ 5,000 \\
• \hline
• \end{array}\]

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Definitions:

Explicit Costs

Costs that involve direct monetary payment by a business to purchase or maintain resources.

Usury Law

Legal regulations that set maximum interest rates that can be charged on loans to protect consumers against excessively high rates.

Equilibrium Interest Rate

The interest rate at which the demand for money in an economy equals the supply of money, maintaining a balance without excess surplus or shortage.

Market Equilibrium

The state in which market supply equals market demand, leading to price stability.