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 2018, capital balances were as follows:

Due to a cash shortage, Purkerson invests an additional $16,000 in the business on April 1, 2018.

Each partner is allowed to withdraw $1,000 cash each month.

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, $12,000; Smith, $28,000; and Traynor, $8,000.

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 3:3:4 to Purkerson, Smith, and Traynor, respectively. The net income for 2018 is $32,000. Each partner withdraws the allotted amount each month.

What are the ending capital balances for 2018?

Purkerson $ 90,000 Smith 70,000 Traynor 30,000

Explanation / Answer

**Average monthly capital balance"

Pukerson : [90000+16000]*1/12*.20 = 1766.67

smith :[70000*1/12]*.20= 1166.67

traynor: [30000*1/12]*.20= 500

Purkerson Smith Traynor Total Beginning capital balance 90000 70000 30000 Additional investment 16000 Drawings (12000)    [1000*12] (12000) (12000) salary allowance 12000 28000 8000 48000 Interest 1766.67 1166.67 500 3433.34 share in profit /(loss) (5830 )    [19433.34*3/10] (5830) (7773.34) 32000-48000-3433.34= 19433.34 Ending capital balance 101936.67 81336.67 18726.66

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