Question

Carla and Eliza share income equally. For the current year, the partnership net income is $40,000. Carla made withdrawals of $12,000 and Eliza made withdrawals of $21,000. At the beginning of the year, the capital account balances were: Carla capital, $42,000; Eliza capital, $55,000. Eliza’s capital account balance at the end of the year is (asw: $54,000)

Explain how you got the answer please!

Answer 1

Particulars To Cash (Withdrawal ) Carla 12,000.00 $ $ Partner's Capital Account Eliza Particulars 21,000.00 By Beginning Balance By Net Income 54,000.00 75,000.00 $ $ Carla 42,000.00 $ 20,000.00 $ Eliza 55,000.00 20,000.00 By Ending Balance (b/f) $ $ 50,000.00 $ 62,000.00 $ $ 62,000.00 $ 75,000.00 Net Income is Shared between Carla & Eliza equally. Therefore, Share of Net Income = $40,000/2 = $20,000. Hence, Carla's Capital at end = $50,000 and Eliza's Capital at end = $ 54,000. This can also be shown by the Statement Form as illustrated below. Particulars Capital at Beginning of the Year Add: Net Income Less: Withdrawal of Capital Capital at the End of the Year Carla $42,000.00 $20,000.00 $12,000.00 $50,000.00 Eliza $55,000.00 $20,000.00 $21,000.00 $54,000.00 Alternatively, It can be Calculated as- Carla's Capital at End= $42,000+20,000-12,000 = $50,000 Eliza's Capital at End= $55,000+20,000-21,000 = $54,000