(TCO G) Norr and Caylor established a partnership on January 1, 20X0. Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000. For both partners, the beginning capital balance was to equal the initial investment. Norr and Caylor agreed to the following procedure for sharing profits and losses. • 2% interest on the yearly beginning capital balance • $10 per hour of work that can be billed to the partnership's clients • The remainder divided in a 3:2 ratio The articles of partnership specified that each partner should withdraw no more than $1,000 per month. For 20X0, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 20X1, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours, respectively. Each partner withdrew $1,000 per month throughout 20X0 and 20X1. Required: (A) Determine the amount of net income allocated to each partner for 20X0. (B) Determine the balance in both capital accounts at the end of 20X0.
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.
(TCO G) Norr and Caylor established a
• 2% interest on the yearly beginning capital balance
• $10 per hour of work that can be billed to the partnership's clients
• The remainder divided in a 3:2 ratio
The articles of partnership specified that each partner should withdraw no more than $1,000 per month.
For 20X0, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 20X1, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours, respectively. Each partner withdrew $1,000 per month throughout 20X0 and 20X1.
Required:
(A) Determine the amount of net income allocated to each partner for 20X0.
(B) Determine the balance in both capital accounts at the end of 20X0.
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