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A partnership begins its first year with the following capital balances: Alfred, Capital $ 48,000 Bernard, Capital 58,000 Collins, Capital 68,000 The articles of partnership stipulate that profits and losses be assigned in the following manner: Each partner is allocated interest equal to 10 percent of the beginning capital balance. Bernard is allocated compensation of $16,000 per year. Any remaining profits and losses are allocated on a 3:3:4 basis, respectively. Each partner is allowed to withdraw up to $4,000 cash per year. Assuming that the net income is $58,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year

Sagot :

Anthougoidn

Answer:

The balance in Collins capital account at the end of that year is:

$80,640.

Explanation:

a) Data and Calculations:

                                           Alfred       Bernard      Collins         Total

Capital balances              $48,000    $58,000     $68,000    $174,000

Profit sharing:                                                                            $58,000

Interest on capital (10%)    $4,800      $5,800        $6,800     ($17,400)

Compensation                                      16,000                        ($16,000)

Allocation of balance          7,380          7,380          9,840   ($24,600)

Drawings                           (4,000)        (4,000)        (4,000)   ($12,000)

Balances                         $56,180      $83,180     $80,640  

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