On January 1, 2020, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $44,000, $75,000, and $74,000, respectively. Over the next three years, the business reported net income and (loss) as follows: 2020 $ 84,000 2021
On January 1, 2020, the dental
| 2020 | $ | 84,000 | |
| 2021 | 56,000 | ||
| 2022 | (39,000 | ) | |
During this period, each partner withdrew cash of $16,000 per year. Krause invested an additional $6,000 in cash on February 9, 2021.
At the time that the partnership was created, the three partners agreed to allocate all
- Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year.
- Because of prior work experience, Angela is entitled to an annual salary allowance of $12,500 per year, and Diaz is entitled to an annual salary allowance of $10,400 per year.
- Any remaining profit will be split as follows: Angela, 20 percent; Diaz, 45 percent; and Krause, 35 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 30 percent; Diaz, 55 percent; and Krause, 15 percent.
Prepare a schedule that determines the ending capital balance for each partner as of the end of each of these three years.
Find the Ending Capital Balance 2020, 2021, 2022
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
