Franco and Elisa Share Income Equally

question 169

Multiple Choice

Franco and Elisa share income equally. During the current year the partnership net income was $40,000. Franco made withdrawals of $12,000 and Elisa made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Franco capital, $40,000; Elisa capital, $58,000. Franco's capital account balance at the end of the year is

• A) $74,500
• B) $62,500
• C) $60,000
• D) $48,000

---

Definitions:

Equity Method

An accounting technique used to record investments in other companies, recognizing income based on the investor's share of the investee's profits.

Subsidiary Earnings

Profits generated by a company that is majority-owned or fully owned by another company (the parent company).

Income Statement

An income statement is a financial document that shows a company's revenues, expenses, and net income over a specific period.

Cash Surrender Value

The amount of money an insurance company will pay to a policyholder if their policy is voluntarily terminated before its maturity or an insured event occurs.