Bonnie and Cathy Have a Profit and Loss Sharing Agreement

Multiple Choice

Bonnie and Cathy have a profit and loss sharing agreement where: (1) salaries of $20 000 each are credited, (2) 10% interest is allowed on capital balances (3) the remaining profit or loss is split 60-40 in favour of Bonnie. At the end of the year, before the distribution of profits or losses, capital account balances were $50 000 and $35 000 for Bonnie and Cathy, respectively. Profit for the year was $66 000 before distributions to partners. Assuming capital balances are adjusted to reflect profits and losses, what is Bonnie's ending capital account balance?

A) $89 600
B) $64 600
C) $85 500
D) $35 500