A partnership begins its first year with the following capital balances: Alfred, Capital $30,000 Bernard, Capital 40,000 Collins, Capital 50,000 The articles of partnership stipulate that profits and losses be assigned in the following manner: - Each partner is allocated interest equal to 5 percent of the beginning capital balance. - Bernard is allocated compensation of $10,000 per year. - Any remaining profits and losses are allocated on a 3:3:4 basis, respectively. - Each partner is allowed to withdraw up to $3,000 cash per year. Assuming that the net income is $40,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year? a. $62,100 b. $51,900 c. $59,100 d. $52,500
A partnership begins its first year with the following capital balances: Alfred, Capital $30,000 Bernard, Capital 40,000 Collins, Capital 50,000 The articles of partnership stipulate that profits and losses be assigned in the following manner: - Each partner is allocated interest equal to 5 percent of the beginning capital balance. - Bernard is allocated compensation of $10,000 per year. - Any remaining profits and losses are allocated on a 3:3:4 basis, respectively. - Each partner is allowed to withdraw up to $3,000 cash per year. Assuming that the net income is $40,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year? a. $62,100 b. $51,900 c. $59,100 d. $52,500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A
| Alfred, Capital | $30,000 |
| Bernard, Capital | 40,000 |
| Collins, Capital | 50,000 |
The articles of partnership stipulate that
- Each partner is allocated interest equal to 5 percent of the beginning capital balance.
- Bernard is allocated compensation of $10,000 per year.
- Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.
- Each partner is allowed to withdraw up to $3,000 cash per year.
Assuming that the net income is $40,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year?
a. $62,100
b. $51,900
c. $59,100
d. $52,500
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