Salem and Durham entered into a partnership to provide supply chain management and logistic services in the Silicon Valley region of California. In their agreed Articles of Partnership, the partners acknowledged the following: Sharing of profits and losses: Compensate each partner $125 per hour for their billable hourly consulting work performed. Salem receives an additional $3,000 monthly as the partnership’s Chief Operating Officer (COO); Durham receives an additional $2,500 monthly as the partnership’s Chief Technology Officer (CTO), Any remaining profits or losses are divided equally between the partners. Each partner is permitted but not required to withdraw no more than $800 per month from the partnership and such withdrawals will be accounted for as direct reductions of the withdrawing partner’s capital balance. They will begin their partnership with equal beginning capital balances. On January 1, 20x1, when they formed the partnership, each partners’ contributions were as follows: Salem invested cash of $50,000. Durham invested $140,000 in cash and she invested office equipment with a book value of $10,000 and fair value of $25,000. In recognition of Salem’s expertise in supply chain management and distribution logistics, the partners have agreed to begin their partnership with equal capital balances, as noted in the partnership agreement above. For fiscal year-ending 20x1, the total partnership's net income was $410,000. Additionally, in 20x1, Salem worked 1,100 billable partnership hours, and Durham worked 1,500 billable hours. Lastly, each partner withdrew their allotted $800 per month throughout 20x1. Required For fiscal year-ending 20x1, prepare a schedule showing the balance in each partner’s capital account at the end fiscal year 20x1.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
Salem and Durham entered into a partnership to provide supply chain management and logistic services in the Silicon Valley region of California.
In their agreed Articles of Partnership, the partners acknowledged the following:
- Sharing of profits and losses:
- Compensate each partner $125 per hour for their billable hourly consulting work performed.
- Salem receives an additional $3,000 monthly as the partnership’s Chief Operating Officer (COO);
- Durham receives an additional $2,500 monthly as the partnership’s Chief Technology Officer (CTO),
- Any remaining
profits or losses are divided equally between the partners.
- Each partner is permitted but not required to withdraw no more than $800 per month from the partnership and such withdrawals will be accounted for as direct reductions of the withdrawing partner’s capital balance.
- They will begin their partnership with equal beginning capital balances.
On January 1, 20x1, when they formed the partnership, each partners’ contributions were as follows:
- Salem invested cash of $50,000.
- Durham invested $140,000 in cash and she invested office equipment with a book value of $10,000 and fair value of $25,000.
- In recognition of Salem’s expertise in supply chain management and distribution logistics, the partners have agreed to begin their partnership with equal capital balances, as noted in the partnership agreement above.
For fiscal year-ending 20x1, the total partnership's net income was $410,000.
Additionally, in 20x1, Salem worked 1,100 billable partnership hours, and Durham worked 1,500 billable hours.
Lastly, each partner withdrew their allotted $800 per month throughout 20x1.
Required
- For fiscal year-ending 20x1, prepare a schedule showing the balance in each partner’s capital account at the end fiscal year 20x1.
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