Question

In: Accounting

Betta, Gretta and Jetta operate a partnership business sharing profits and losses in the ratio of...

Betta, Gretta and Jetta operate a partnership business sharing profits and losses in the ratio of 5:3:2.

Their capital balances at the beginning of the year were $60,000, $40,000 and $30,000 respectively.

For the year ending June 30, 2020 the following information is given to you.

Net Income from operations $120,000

Salaries paid to Betta and Gretta were $500 per month.

Jetta was paid a bonus of $5,000 for the year.

All the partners were to receive interest on capital @6% per annum on their beginning capital balances.

Betta, Gretta and Jetta withdrew $6,000, $5,000 and $8,000 respectively.

Required:

Prepare a statement to show the ending capital account balances of the 3 partners at the end of June 30, 2020.

Expert Solution

	Betta	Gretta	Jetta	Total
Salaries allowance	6,000	6,000	0	12,000
Bonus allowance	0	0	5,000	5,000
Interest allowance	3,600	2,400	1,800	7,800
Total	9,600	8,400	6,800	24,800
Remaining income	47,600	28,560	19,040	95,200
Total	57,200	36,960	25,840	120,000

Betta share of income = 95,200 x 5/10

= $47,600

Gretta share of income = 95,200 x 3/10

= $28,560

Jetta share of income = 95,200 x 2/10

= $19,040

Betta share of interest on capital = 60,000 x 6%

= $3,600

Gretta share of interest on capital = 40,000 x 6%

= $2,400

Jetta share of interest on capital = 30,000 x 6%

= $1,800

Salary paid to Betta = 500 x 12

= $6,000

Salary paid to Gretta = 500 x 12

= $6,000

Statement of capital

	Betta	Gretta	Jetta
Beginning capital	60,000	40,000	30,000
salary allowance	6,000	6,000	0
Interest allowance	3,600	2,400	1,800
Bonus allowance	0	0	5,000
Share of income	47,600	28,560	19,040
	117,200	76,960	55,840
Drawings	-6,000	-5,000	-8,000
Ending capital	$111,200	$71,960	$47,840

	Betta	Gretta	Jetta
Ending capital of partner's	$111,200	$71,960	$47,840

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