Question

Che 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: $ 64,000 Purkerson Smith Traynor 44,000 20,000 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

Capital Account Parhcular Pukeen Smith Traynor Particular Rukerson Smith TraynoY with drawl (500 X12) GO00 Balance bld 64000 ччо0 20000 GO00 6 000 Addhional capital withdrawl 11280 5640 1280 (4:2: 4) compone sahon a llowonce l1000 27000 y000 Ending balancecla 75120 68160 10720) 00.90 12.600+ 600 13400 Interest on 8900 capital Total balance 2400 79800 250 00 92400 79800 28 000 Int on cupital = 4 000 x 20% × 3 = 600 withdrawl amount = Compensahon +Int on cup -~et Income = (1000 +27000 +uooo) + (134 00 + 8S00 +40 oo)- yo000 =28200 Ending halane 4:3: 43 /1280 5640: II280 Pukerson 75120 Smith 68160 Traynor 10720 Total 154000