A partnership begins its first year of operations with the following capital balances:Winston, Capital$ 52,000Durham, CapitalSalem, Capital42,00052,000According 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 $5,000 per year.The net loss for the first year of operations is $20,000 and net income for the subsequent year is $25,000. Each partner withdraws themaximum amount from the business each period. What is the balance in Winston's capital account at the end of the second year?

Capital -The capital means the assets and cash in a business. Capital may either be cash, machinery,…

e net loss for the first year of operations is $20,000 and net income for the subsequent year is $25,000. Each partner withdraws the aximum amount from the business each period. What is the balance in Winston's capital account at the end of the second year?

e net loss for the first year of operations is $20,000 and net income for the subsequent year is $25,000. Each partner withdraws the aximum amount from the business each period. What is the balance in Winston's capital account at the end of the second year?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A partnership begins its first year of operations with the following capital balances:
Winston, Capital
$ 52,000
Durham, Capital
Salem, Capital
42,000
52,000
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 $5,000 per year.
The net loss for the first year of operations is $20,000 and net income for the subsequent year is $25,000. 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?

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Step 3: Calculation of the balance in Partner W's capital account at the end of the first year

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Step 4: Calculation of Total profit or loss

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Step 5: Calculation of the balance in Partner W's capital account at the end of the second year

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