A partnership began its 1st year of operations with the following capital balanc

Question

A partnership began its 1st year of operations with the following capital balances:

Young, capital $143,000

Easton, capital $104,000

Thurman, capital $143,000

? Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.
? Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
? The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
? Each partner withdrew $13,000 per year.

Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.

A. What was Eaton's total share of net income for the second year?

$19,760 income.

$17,160 income.

$ 4,160 income.

$17,290 income.

$28,080 income.

B. What was Thurman's total share of net income for the second year?

$ 4,160 income.

$19,760 income.

$17,290 income.

$17,160 income.

$28,080 income.

C. What was the balance in Young's Capital account at the end of the second year?

$ 71,760.

$ 84,760.

$133,380.

$132,860.

$105,690.

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:

Explanation / Answer

A. What was Eaton's total share of net income for the second year?

B. What was Thurman's total share of net income for the second year?

C. What was the balance in Young's Capital account at the end of the second year?

$133,380.

Young Easton Thurman Net Income Cumulative Loss Capital Balance Year 1-Opening 143000 104000 143000 -26000 -26000 Salary 26000 13000 -39000 -65000 interest@10 14300 10400 14300 -39000 -104000 Loss Shared 5:2:3 -52000 -20800 -31200 104000 0 Drawings -13000 -13000 -13000 Capital Balance Year 1 Ending 118300 80600 126100 Capital Balance Year 2 Opening 118300 80600 126100 52000 52000 Salary 26000 13000 -39000 13000 interest@10 11830 8060 12610 -32500 -19500 Loss Shared 5:2:3 -9750 -3900 -5850 19500 Drawings -13000 -13000 -13000 Capital Balance Year 2 Ending 133380 71760 132860

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