Question

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Check my world Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2018, capital balances were as follows: Purkerson Smith Traynor $ 64,000 44,00 20, eee Due to a cash shortage. Purkerson invests an additional $4,000 in the business on April 1. 2018. Each partner is allowed to withdraw $500 cash each month The partners have used the same method of allocating profits and losses since the business's inception: • Each partner is given the following compensation allowance for work done in the business: Purkerson, $11.000: Smith, $27,000 and Traynor. $4.000. • Each partner is credited with interest equal to 20 percent of the average monthly capital balance for the year without regard for normal drawings . Any remaining profit or loss is allocated 4:2:4 to Purkerson. Smith and Traynor, respectively. The net income for 2018 is $40.000 Each partner withdraws the allotted amount each month What are the ending capital balances for 2018?

Answer 1

Purkerson Smith Traynor Totals Ending Capital Balances 75,120 68,160 10,720 1,54,000 $ Explanation o 40,000 Net Income Less: Compensation to partners Interest on capital Net Loss To lo ea 42,000 26,200 -28,200 $ Purkerson 64,000 $ Smith 44,000 $ Traynor 20,000 $ Totals 1,28,000 Opening Balance Add: Additional Capital (a) Compensation to partners (b) Interest on capital $ 4,000 $ 4,000 $ 4,000 11,000 27,000 12,800 8,800 600 13,400 $ 8,800 ($64,000 X 20%) + ($44,000 X 20%) ($4,000 X 20% X 9/12) 4,000 42,000 25,600 600 26,200 $ $ 4,000 ($20,000 X 20%) Less: Drawings (d) 18,000 Net loss (e) 6,000 6,000 6,000 ($500 X 12) ($500 X 12) ($500 X 12) 11,280 $ 5,640 $ 11,280 ($28,200 X 4/10) ($28,200 X 2/10) ($28,200 X 4/10) $ 75,120 $ 68,160 $ 10,720 $ 28,200 Ending Balance (a)+(b)+(c)-(d)-(e) 1,54,000