Purkerson, Smith, and Traynor have operated a bookstore for a number of years as

Question

Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2015, capital balances were as follows:

Due to a cash shortage, Purkerson invests an additional $10,000 in the business on April 1, 2015.

      The partners have used the same method of allocating profits and losses since the business's inception:

Each partner is given the following compensation allowance for work done in the business: Purkerson, $10,000; Smith, $20,000; and Traynor, $6,000.

Each partner is credited with interest equal to 20 percent of the average monthly capital balance for the year without regard for normal drawings.

Any remaining profit or loss is allocated 5:3:2 to Purkerson, Smith, and Traynor, respectively. The net income for 2015 is $20,000. Each partner withdraws the allotted amount each month.

What are the ending capital balances for 2015?

Explanation / Answer

Purkerson Smith Traynor Capital                98,000                78,000                20,000 Additional capital                10,000                         -                           -   Total             108,000                78,000                20,000 Drawing -               9,600 -               9,600 -               9,600 compensation                10,000                20,000                  6,000 interest @20%                21,600                15,600                  4,000 profit                10,000                  6,000                  4,000 Endning balance             140,000             110,000                24,400

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