A partnership begins its first year of operations with the following capital balances: Winston, Capital$64,000Durham, Capital 54,000Salem, Capital 64,000 According to the articles of partnership, all profits will be assigned as follows: Winston will be awarded an annual salary of $12,000 with $6,000 assigned to Salem.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 $6,000 per year. The net loss for the first year of operations is $24,000 and net income for the subsequent year is $26,000. Each partner withdraws the maximum amount from the business each period. What is the balance in Winston’s capital account at the end of the second year?a. $53,930b. $59,930c. $56,930d. $46,300

The question is based on the concept of Accounting for partnership.

Answered: A partnership begins its first year of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

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


Winston, Capital	$	64,000
Durham, Capital		54,000
Salem, Capital		64,000

According to the articles of partnership, all profits will be assigned as follows:

Winston will be awarded an annual salary of $12,000 with $6,000 assigned to Salem.
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 $6,000 per year.

The net loss for the first year of operations is $24,000 and net income for the subsequent year is $26,000. Each partner withdraws the maximum amount from the business each period. What is the balance in Winston’s capital account at the end of the second year?

a. $53,930

b. $59,930

c. $56,930

d. $46,300

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions