A partnership begins its first year of operations with the following capital balances: Allegan, Capital $ 110,000 Berrien, Capital 80,000 Kent, Capital 110,000 According to the articles of partnership, all profits will be assigned as follows: Allegan will be awarded an annual salary of $20,000 with $10,000 assigned to Kent. The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year. The remainder will be assigned on a 5:2:3 basis, respectively. Each partner is allowed to withdraw up to $10,000 per year. The net loss for the first year of operations is $20,000, and net income for the subsequent year is $40,000. Each partner withdraws the maximum amount from the business each period. Required: Prepare schedules that compute the balances in each partner's capital account at the end of each of the first two years of partnership operations.
A partnership begins its first year of operations with the following capital balances: Allegan, Capital $ 110,000 Berrien, Capital 80,000 Kent, Capital 110,000 According to the articles of partnership, all profits will be assigned as follows: Allegan will be awarded an annual salary of $20,000 with $10,000 assigned to Kent. The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year. The remainder will be assigned on a 5:2:3 basis, respectively. Each partner is allowed to withdraw up to $10,000 per year. The net loss for the first year of operations is $20,000, and net income for the subsequent year is $40,000. Each partner withdraws the maximum amount from the business each period. Required: Prepare schedules that compute the balances in each partner's capital account at the end of each of the first two years of partnership operations.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter12: Accounting For Partnerships And Limited Liability Companies
Section: Chapter Questions
Problem 9E
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Question
A partnership begins its first year of operations with the following capital balances:
| Allegan, Capital | $ 110,000 |
|---|---|
| Berrien, Capital | 80,000 |
| Kent, Capital | 110,000 |
According to the articles of partnership, all profits will be assigned as follows:
- Allegan will be awarded an annual salary of $20,000 with $10,000 assigned to Kent.
- The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year.
- The remainder will be assigned on a 5:2:3 basis, respectively.
- Each partner is allowed to withdraw up to $10,000 per year.
The net loss for the first year of operations is $20,000, and net income for the subsequent year is $40,000. Each partner withdraws the maximum amount from the business each period.
Required:
Prepare schedules that compute the balances in each partner's capital account at the end of each of the first two years of partnership operations.
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