Ezra and Marie’s
Ezra and Marie’s partnership agreement specifies 10% interest on the average capital balance and salaries of $60,000 to Ezra and $100,000 to Marie, with the remainder of the income split 3:2 with the larger portion to Ezra. In 2020, the company posted a net loss of $21,000 with Ezra’s average capital balance being $165,000, and Marie had an average capital balance of $76,000. What is the appropriate allocation of the 2020 results?
a- Ezra’s capital account should be reduced by $6,300, and Marie’s capital account should be reduced by $4,200.
b- $0 to both Ezra and Marie since there was no net income for the year.
c- Ezra’s capital account should be reduced by $123,060, and Marie’s capital account should be reduced by $82,040.
e- Ezra’s capital account should be reduced by $46,560, and Marie’s capital account should be increased by $25,560.
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