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How much is the ending balance of b capital account

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A and B formed a partnership and began operations on March 1, 20x1. A invested ?400,000 cash while B invested equipment with a book value of ?1,200,000 and a fair value of ?720,000. On August 31, 20x1, A invested additional cash of ?80,000.

The partnership agreement stipulates the following:

  • Monthly salary allowances of ?8,000 and ?40,000 to A and B, respectively, recognized as expenses.
  • 20% bonus on profit before salaries and interest but after bonus to B.
  • 12% annual interest on the beginning capital of A.
  • Balance equally.

The monthly salaries are withdrawn by the partners at each month-end. The partnership earned profit of ?840,000 during the period before deductions for bonus and interest.

Problem 1: How much is the ending balance of B's capital account?

a. 1,230,000     c. 910,000

b. 1,710,000      d. 1,630,000

Reference no: EM132759341

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