Fox, Greg, and Howe are partners with average capital balances during 2005 of $120,000, $60,000, and $40,000, respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of $30,000 to Fox and $20,000 to Howe, the residual profit or loss is divided equally. In 2006 the partnership sustained a $33,000 loss before interest and salaries to partners. By what amount should Fox’s capital account change?

  1. $ 7,000 increase.
  2. $11,000 decrease.
  3. $35,000 decrease.
  4. $42,000 increase.