Question

A partnership began its first year of operations with the following capital balances:

Young, Capital: $143,000
Eaton, Capital: $104,000
Thurman, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.

21. What was Eaton's total share of net loss for the first year?

A. $3,900 loss.
B. $11,700 loss.
C. $10,400 loss.
D. $24,700 loss.
E. $9,100 loss.

22. What was the balance in Young's Capital account at the end of the first year?
A. $120,900.
B. $118,300.
C. $126,100.
D. $80,600.
E. $111,500.

Answer 1

		Salary	Interest @ 10%	Total Credits	Sharing Ratio	Withdrawal
Young, Capital	$143,000	26000	14300	40300	5	13000
Eaton, Capital	$104,000		10400	10400	2	13000
Thurman, Capital	$143,000	13000	14300	27300	3	13000
		39000	39000	78000
First Year net loss	($26,000)
Add: addl loss	($78,000)
Total Loss	($104,000)
Loss distribution as per ratio	Loss	Credits	Net Loss	Capital balance	Withdrawal	Net capital balance
Young-5	-52000	40300	-11700	$143,000	-13000	118300
Eaton-2	-20800	10400	-10400	$104,000	-13000	80600
Thurman-3	-31200	27300	-3900	$143,000	-13000	126100

Answer 2

24,700 loss

Answer 3

17,160 income