Partnership profit allocation: interest on fixed capital then residual sharing in 3:2 ratio Steps:

• Interest on J's capital: 10% × $40,000 =$4,000; on K's: 10% × $60,000 =$6,000; total interest $10,000
• Residual profit: $250,000 total profit -$10,000 interest = $240,000
• J's residual share: 3/5 × $240,000 =$144,000
• J's total profit share: $144,000 +$4,000 interest = $148,000 Why C is correct:
• Matches formula for profit appropriation in partnerships: interest credited first from gross profit, then residual divided per sharing ratio (3:2). Why the others are wrong:
• A: Arithmetic error in residual allocation, e.g., understating J's residual share by $1,000.
• B: Ignores interest deduction, e.g., 3/5 of overstated $300,000 profit.
• D: Applies ratio only to small or wrong profit base, omitting interest entirely. Final answer: C