A partnership begins its first year with the following capital balances:
Arthur, Capital | $ 60,000 |
Baxter, Capital | 80,000 |
Cartwright, Capital | 100,000 |
The articles of partnership stipulate that profits and losses be assigned in the following manner:
• Each partner is allocated interest equal to 10 percent of the beginning capital balance.
• Baxter is allocated compensation of $20,000 per year.
• Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.
• Each partner is allowed to withdraw up to $5,000 cash per year.
Assuming that the net income is $50,000 and that each partner withdraws the maximum amount allowed, what is the balance in Cartwright’s capital account at the end of that year?
a. $105,800.
b. $106,200.
c. $106,900.
d. $107,400.
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