Question

On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $32,000, $60,000. and $62,000, respectively. Over the next three years, the business reported net income and loss) as follows: $ 72,000 44,eee (27,000) During this period, each partner withdrew cash of $13,000 per year. Krause invested an additional $4,000 in cash on February 9, 2018 At the time that the partnership was created, the three partners agreed to allocate all profits and losses according to a specified plan written as follows: . Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year. Because of prior work experience, Angela is entitled to an annual salary allowance of $13,000 per year and Diaz is entitled to an annual salary allowance of $9.200 per year. Any remaining profit will be split as follows: Angela, 30 percent; Diaz, 35 percent; and Krause, 35 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela. 40 percent: Diaz, 45 percent: and Krause, 15 percent. Determine the ending capital balance for each partner as of the end of each of these three years. (Do not round Intermediate calculations, Round your final answers to the nearest dollar amount.)

Answer 1

Statement of Capital

Year	2017			2018			2019
Opening Balance	$32,000	$60,000	$62,000	$56,800	$87,400	$80,400	$75,680	$107,740	$94,840
Proft/(Loss)	$21,600	$25,200	$25,200	$13,200	$15,400	$15,400	$(10,800)	$(12,150)	$(4,050)
Addition	0	0	0	0	0	$ 4,000	0	0	0
Withdrawal	$(13,000)	$(13,000)	$(13,000)	$(13,000)	$(13,000)	$(13,000)	$(13,000)	$(13,000)	$(13,000)
Interest	$ 3,200	$ 6,000	$ 6,200	$ 5,680	$ 8,740	8,040	$ 7,568	$ 10,774	$ 9,484
Salary	$ 13,000	$ 9,200	0	$ 13,000	$ 9,200	0	$ 13,000	$ 9,200	0
Closing Balance	$ 56,800	$ 87,400	$ 80,400	$ 75,680	$ 107,740	$ 94,840	$ 72,448	$ 102,564	$ 87,274

Working Notes;

2017 - Profit /(Loss) Calculation

Angela - $ 72,000 * 30 % = $ 21,600

Diaz - $ 72,000 * 35% = $ 25,200

Krause - $ 72,000 * 35 % = $ 25,200

Interest

Angela - $ 32,000 * 10 % = $ 3,200

Diaz - $60,000 * 10 % = $ 6,000

Krause : $ 62,000 * 10 % = $ 6,200

## 2018 Profit / ( Loss) Calculation

Angela : $ 44,000 * 30 % = $ 13,200

Diaz : $ 44,000 * 35 % = $ 15,400

Krause : $ 44,000 * 35% = $ 15,400

Interest

Angela : $ 56,800 * 10 % = $ 5,680

Diaz : $ 87,400 * 10 % = $ 8,740

Krause : $ 80,400 * 10 % = $ 8,040

## 2019 : Profit / ( Loss ) Calculation

Angela : ($ 27,000 ) * 40 % = $ 10,800

Diaz : ($ 27,000) * 45 % = $ 12,150

Krause :( $ 27,000) * 15 % = $ 4,050

Interest

Angela = $ 75,680 * 10 % =$ 7,568

Diaz = $ 107,740 * 10 % = $ 10,774

Krause = $ 94,840 * 10 % = $ 9,484