Smith, West, and Krug Form a Partnership

Multiple Choice

Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $174,000 for its first year, what amount of income is credited to Krug's capital account?

A) $58,000.
B) $57,000.
C) $61,500.
D) $55,500.
E) $48,000.