On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was forme

Question

On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $32,000, $60,000, and $62,000, respectively. Over the next three years, the business reported net income and (loss) as follows:

During this period, each partner withdrew cash of $13,000 per year. Krause invested an additional $4,000 in cash on February 9, 2018.

At the time that the partnership was created, the three partners agreed to allocate all profits and losses according to a specified plan written as follows:

Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year.

Because of prior work experience, Angela is entitled to an annual salary allowance of $13,000 per year and Diaz is entitled to an annual salary allowance of $9,200 per year.

Any remaining profit will be split as follows: Angela, 30 percent; Diaz, 35 percent; and Krause, 35 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 40 percent; Diaz, 45 percent; and Krause, 15 percent.

Determine the ending capital balance for each partner as of the end of each of these three years. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

2017 $ 72,000 2018 44,000 2019 (27,000 )

Explanation / Answer

Working:

Profit / (loss) to be appropriated to partners:

Angela Diaz Krause Year 2017 Year 2017 Year 2017 Capital Contributed           32,000 Capital Contributed           60,000 Capital Contributed           62,000 Cash Withdrawal         (13,000) Cash Withdrawal         (13,000) Cash Withdrawal         (13,000) Interest on Capital              3,200 Interest on Capital              6,000 Interest on Capital              6,200 Salary Allowance           13,000 Salary Allowance              9,200 Salary Allowance                     -   Profit appropriation
30% of 34,400           10,320 Profit appropriation
35% of 34,400           12,040 Profit appropriation
35% of 34,400           12,040 Ending Capital of 2017           45,520 Ending Capital of 2017           74,240 Ending Capital of 2017           67,240 Year 2018 Begininng Capital           45,520 Begininng Capital           74,240 Begininng Capital           67,240 Cash Withdrawal         (13,000) Cash Withdrawal         (13,000) Cash Withdrawal         (13,000) Capital Invested                     -   Capital Invested                     -   Capital Invested              4,000 Interest on Capital              4,552 Interest on Capital              7,424 Interest on Capital              6,724 Salary Allowance           13,000 Salary Allowance              9,200 Salary Allowance                     -   Profit appropriation
30% of 3,100                 930 Profit appropriation
35% of 3,100              1,085 Profit appropriation
35% of 3,100              1,085 Ending Capital of 2018           51,002 Ending Capital of 2018           78,949 Ending Capital of 2018           66,049 Year 2019 Begininng Capital           51,002 Begininng Capital           78,949 Begininng Capital           66,049 Cash Withdrawal         (13,000) Cash Withdrawal         (13,000) Cash Withdrawal         (13,000) Interest on Capital              5,100 Interest on Capital              7,895 Interest on Capital              6,605 Salary Allowance           13,000 Salary Allowance              9,200 Salary Allowance                     -   Loss appropriation
40% of 68,800         (27,520) Loss appropriation
45% of 68,800         (30,960) Loss appropriation
15% of 68,800         (10,320) Ending Capital of 2019           28,582 Ending Capital of 2019           52,084 Ending Capital of 2019           49,334

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