Connie and Carole Have a Profit and Loss Sharing Agreement

Multiple Choice

Connie and Carole have a profit and loss sharing agreement where: (1) salaries of $10 000 each are credited, (2) 12% interest is allowed on capital balances (3) the remaining profit or loss is split 60-40 in favour of Connie. At the end of the year, before the distribution of profits or losses, capital account balances were $20 000 and $40 000 for Connie and Carole, respectively. Profit was $36 000 before distributions to partners. What is Connie's ending capital account balance assuming capital balances are adjusted to reflect profits and losses?

A) $58 320
B) $57 680
C) $37 680
D) $38 320