Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investme

Question

Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013.

What was the amount of interest attributed to Wasser for 2013? (A: $20,100)

Explanation / Answer

Cleary Wasser Nolan Jan 1 2012 Investment 100000 150000 200000 Dec 31 2012 Interest in Capital 10000 15000 20000 Dec 31 2012 Compensation 10000 Dec 31 2012 Drawings for the year -12000 -12000 -12000 Share of Profit 19000 38000 38000 Dec 31 2012 Closing Balance 117000 201000 246000 Jan 1 2013 Openiing Balance 117000 201000 246000 Dec 31 2013 Interest on Capital 11700 20100 24600 Profit for the year 2012 150000 Compensation for Wasser -10000 Interest for Cleary -10000 Interest for Wasser -15000 Interest for Nolan -20000 Balance of Profit 95000 Share of Cleary 19000 Share of Wasser 38000 Share of Nolan 38000

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