In: Accounting
The Trump, Clinton, Mueller Partnership has been around for several years | |||||||||
The partners share profits equally but Trump and Clinton take 40% of losses while Mueller only take 20% of losses. | |||||||||
Mueller receives $30,000 in salary and all partners get 10% return on their beginning of the year capital accounts. | |||||||||
Each year Trump makes a withdrawl of $6000 for hair care products and Clinton makes a withdrawl of $15,000 for new pant suits. | |||||||||
At the beginning of 2017 Trump, Clinton and Mueller had the following capital accounts | |||||||||
Trump | 500,000 | ||||||||
Clinton | 300,000 | ||||||||
Mueller | 200,000 | ||||||||
Income before Mueller salary and partners interest is as follows: | |||||||||
2017 | 400,000 | ||||||||
2018 | 50,000 | ||||||||
2019 | 300,000 | ||||||||
Required: determine each partner's capital account on December 31 | |||||||||
2017 | |||||||||
2018 | |||||||||
2019 |
a) Partner's Capital Account for 2017
Profit for the year = $400,000
(Amounts in $)
Trump | Clinton | Mueller | Total | |
Beginning Balance | 500,000 | 300,000 | 200,000 | 1,000,000 |
Salary Allowances | 30,000 | 30,000 | ||
Interest (10% of Beginning Capital account balance) | 50,000 | 30,000 | 20,000 | 100,000 |
550,000 | 330,000 | 250,000 | 1,130,000 | |
Remainder Profit (Equally) (400,000-130,000) | 90,000 | 90,000 | 90,000 | 270,000 |
640,000 | 420,000 | 340,000 | 1,400,000 | |
Less: Withdrawals | (6,000) | (15,000) | ||
Ending Balance | 634,000 | 405,000 | 340,000 | 1,379,000 |
b) Partner's Capital Account for 2018
Profit for the year = $50,000
(Amounts in $)
Trump | Clinton | Mueller | Total | |
Beginning Balance | 634,000 | 405,000 | 340,000 | 1,379,000 |
Salary Allowances | 30,000 | 30,000 | ||
Interest (10% of Beginning Capital account balance) | 63,400 | 40,500 | 34,000 | 137,900 |
697,400 | 445,500 | 404,000 | 1,546,900 | |
Remainder Loss (50,000-167,900) (40% 40% 20%) | (47,160) | (47,160) | (23,580) | (117,900) |
650,240 | 398,340 | 380,420 | 1,429,000 | |
Less: Withdrawals | (6,000) | (15,000) | (21,000) | |
Ending Balance | 644,240 | 383,340 | 380,420 | 1,408,000 |
c) Partner's Capital Account for 2019
Profit for the year = $300,000
(Amounts in $)
Trump | Clinton | Mueller | Total | |
Beginning Balance | 644,240 | 383,340 | 380,420 | 1,408,000 |
Salary Allowances | 30,000 | 30,000 | ||
Interest (10% of Beginning Capital account balance) | 64,424 | 38,334 | 38,042 | 140,800 |
708,664 | 421,674 | 448,462 | 1,578,800 | |
Remainder Profit (Equally) (300,000-170,800) | 43066 | 43067 | 43067 | 129,200 |
751,730 | 464,741 | 491,529 | 1,708,000 | |
Less: Withdrawals | (6,000) | (15,000) | (21,000) | |
Ending Balance | 745,730 | 449,741 | 491,529 | 1,687,000 |