Question

In: Accounting

A partnership began its 1st year of operations with the following capital balances: Young, capital $143,000...

A partnership began its 1st year of operations with the following capital balances:

Young, capital $143,000

Easton, capital $104,000

Thurman, capital $143,000

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:

? Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.
? Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
? The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
? Each partner withdrew $13,000 per year.

Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.

A. What was Eaton's total share of net income for the second year?

$19,760 income.

$17,160 income.

$ 4,160 income.

$17,290 income.

$28,080 income.

B. What was Thurman's total share of net income for the second year?

$ 4,160 income.

$19,760 income.

$17,290 income.

$17,160 income.

$28,080 income.

C. What was the balance in Young's Capital account at the end of the second year?

$ 71,760.

$ 84,760.

$133,380.

$132,860.

$105,690.

Solutions

Expert Solution

Young Easton Thurman Net Income Cumulative Loss
Capital Balance Year 1-Opening 143000 104000 143000 -26000 -26000
Salary 26000 13000 -39000 -65000
interest@10 14300 10400 14300 -39000 -104000
Loss Shared 5:2:3 -52000 -20800 -31200 104000 0
Drawings -13000 -13000 -13000
Capital Balance Year 1 Ending 118300 80600 126100
Capital Balance Year 2 Opening 118300 80600 126100 52000 52000
Salary 26000 13000 -39000 13000
interest@10 11830 8060 12610 -32500 -19500
Loss Shared 5:2:3 -9750 -3900 -5850 19500
Drawings -13000 -13000 -13000
Capital Balance Year 2 Ending 133380 71760 132860

A. What was Eaton's total share of net income for the second year?

interest@10 8060
Loss Shared 5:2:3 -3900
share of net income 4160

B. What was Thurman's total share of net income for the second year?

Salary 13000
interest@10 12610
Loss Shared 5:2:3 -5850
share of net income 19760

C. What was the balance in Young's Capital account at the end of the second year?

$133,380.

ekkarill92 answered 2 years ago
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