Purkerson, Smith, and Traynor have operated a bookstore for anumber of years as a partnership. At the beginning of 2018, capitalbalances were as follows:
Purkerson $ 96,000 Smith 76,000 Traynor 30,000
Due to a cash shortage, Purkerson invests an additional $6,000in the business on April 1, 2018.
Each partner is allowed to withdraw $700 cash each month.
The partners have used the same method of allocating profits andlosses since the business's inception:
Each partner is given the following compensation allowance forwork done in the business: Purkerson, $15,000; Smith, $25,000; andTraynor, $8,000.
Each partner is credited with interest equal to 20 percent ofthe average monthly capital balance for the year without regard fornormal drawings.
Any remaining profit or loss is allocated 4:2:4 to Purkerson,Smith, and Traynor, respectively. The net income for 2018 is$29,000. Each partner withdraws the allotted amount each month.
What are the ending capital balances for 2018?
Ending Capital Balances Purkerson Smith Traynor Totals
Purkerson, Smith, and Traynor have operated a bookstore for anumber of years as a partnership. At the beginning of 2018, capitalbalances were as follows:
| Purkerson | $ | 96,000 |
| Smith | 76,000 | |
| Traynor | 30,000 | |
Due to a cash shortage, Purkerson invests an additional $6,000in the business on April 1, 2018.
Each partner is allowed to withdraw $700 cash each month.
The partners have used the same method of allocating profits andlosses since the business's inception:
Each partner is given the following compensation allowance forwork done in the business: Purkerson, $15,000; Smith, $25,000; andTraynor, $8,000.
Each partner is credited with interest equal to 20 percent ofthe average monthly capital balance for the year without regard fornormal drawings.
Any remaining profit or loss is allocated 4:2:4 to Purkerson,Smith, and Traynor, respectively. The net income for 2018 is$29,000. Each partner withdraws the allotted amount each month.
What are the ending capital balances for 2018?
|
Related questions
Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $240,000, $210,000, and $105,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations:
Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year.
Profits and losses are allocated according to the following plan:
A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.
Interest is credited to the partnersâ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).
An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.
Any remaining partnership profit or loss is to be divided evenly among all partners.
Because of financial shortfalls encountered in getting the business started, Gray invests an additional $9,500 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monetâs entrance into the firm; the general provisions continue to be applicable.
The billable hours for the partners during the first three years of operation follow:
| 2016 | 2017 | 2018 | |
| Gray | 1,740 | 2,100 | 1,910 |
| Stone | 1,470 | 1,200 | 1,650 |
| Lawson | 1,600 | 1,410 | 1,340 |
| Monet | 0 | 1,220 | 1,610 |
The partnership reports net income for 2016 through 2018 as follows:
| 2016 | $ | 69,000 |
| 2017 | (23,400) | |
| 2018 | 160,000 | |
Each partner withdraws the maximum allowable amount each year.
Determine the allocation of income for each of these three years.
Prepare in appropriate form a statement of partnersâ capital for the year ending December 31, 2018.
Determine the allocation of income for 2016. (Loss amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
| ||||||||||||||||||||||||||||||||||||
Determine the allocation of income for 2017. (Loss amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
| |||||||||||||||||||||||||||||||||||||||||||
Determine the allocation of income for 2018. (Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
| |||||||||||||||||||||||||||||||||||||||||||
Prepare in appropriate form a statement of partnersâ capital for the year ending December 31, 2018. (Amounts to be deducted should be indicated with minus sign. Do not round intermediate calculations. Round your answers to nearest dollar amounts.)
| |||||||||||||||||||||||||||||||||||||||||||||||||
