Question

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

Jeff, Capital: $150,000

Dan, Capital: $200,000

Matthew, Capital: $230,000

The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Jeff, Dan and Matthew were to be awarded annual salaries of $25,000, $15 ,000 and $15,000, respectively. 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 6:2:2 basis to Jeff, Dan and Matthew, respectively. Each partner withdrew $10,000 per year. For the first year of operations the partnership earned net income of $158,000.

What are the balances in each partner’s capital account at the end of the first year?

Answer 1

Solution:

Schedule of Divison of income
Particulars	Jeff	Den	Matthew	Total
Salary Allowance	$25,000.00	$15,000.00	$15,000.00	$55,000.00
Interest Allowance	$15,000.00	$20,000.00	$23,000.00	$58,000.00
Remaining Income (6:2:2)	$27,000.00	$9,000.00	$9,000.00	$45,000.00
Net Income	$67,000.00	$44,000.00	$47,000.00	$158,000.00

Particulars	Jeff	Den	Matthew	Total
Beginning balance	$150,000.00	$200,000.00	$230,000.00	$580,000.00
Add: Net Income for the year	$67,000.00	$44,000.00	$47,000.00	$158,000.00
Less: Member's Withdrawl	$10,000.00	$10,000.00	$10,000.00	$30,000.00
Ending Partner capital	$207,000.00	$234,000.00	$267,000.00	$708,000.00