Question
In: Accounting
On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the...
On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $54,000, $82,000, and $84,000, respectively. Over the next three years, the business reported net income and (loss) as follows:
| 2017 | $ | 94,000 | |
| 2018 | 66,000 | ||
| 2019 | (49,000 | ) | |
During this period, each partner withdrew cash of $17,000 per year. Krause invested an additional $6,000 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 $17,500 per year and Diaz is entitled to an annual salary allowance of $11,400 per year.
Any remaining profit will be split as follows: Angela, 20 percent; Diaz, 30 percent; and Krause, 50 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 30 percent; Diaz, 40 percent; and Krause, 30 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.)
Solutions
Expert Solution
| Partners capital Account - 2017 | ||||||
| Particulars | Angela | Diaz | Krause | |||
| Opening Bal | 54000 | 82000 | 84000 | |||
| Less: | Withdrawl | 17000 | 17000 | 17000 | ||
| Add: | Interest on capital | 5400 | 8200 | 8400 | ||
| 54000*10% | 82000*10% | 84000*10% | ||||
| Add: | Salary | 17500 | 11400 | |||
| Add: | Profit apportion | 8620 | 12930 | 21550 | ||
| Closing Balances-2017 | 68520 | 97530 | 96950 | |||
| Net income statement after allocation to partners | ||||||
| Before allocation | 94000 | |||||
| Less: | Interest | 22000 | ||||
| Less: | Salary | 28900 | ||||
| 43100 | ||||||
| Amount to be adjusted | ||||||
| Angela | 20 | 8620 | ||||
| Diaz | 30 | 12930 | ||||
| Krause | 50 | 21550 | ||||
| Partners capital Account - 2018 | ||||||
| Particulars | Angela | Diaz | Krause | |||
| Opening Bal | 68520 | 97530 | 96950 | |||
| Less: | Withdrawl | 17000 | 17000 | 17000 | ||
| Add: | Interest on capital | 6852 | 9753 | 9695 | ||
| 68520*10% | 97530*10% | 96950*10% | ||||
| Add: | Salary | 17500 | 11400 | 0 | ||
| Add: | Profit apportion | 2160 | 3240 | 5400 | ||
| Closing Balances-2018 | 78032 | 104923 | 95045 | |||
| Net income statement after allocation to partners | ||||||
| Before allocation | 66000 | |||||
| Less: | Interest | 26300 | ||||
| Less: | Salary | 28900 | ||||
| 10800 | ||||||
| Amount to be adjusted | ||||||
| Angela | 20 | 2160 | ||||
| Diaz | 30 | 3240 | ||||
| Krause | 50 | 5400 | ||||
| Partners capital Account - 2019 | ||||||
| Particulars | Angela | Diaz | Krause | |||
| Opening Bal | 78032 | 104923 | 95045 | |||
| Less: | Withdrawl | 17000 | 17000 | 17000 | ||
| Add: | Interest on capital | 7803 | 10492 | 9505 | ||
| 78032*10% | 104923*10% | 95045*10% | ||||
| Add: | Salary | 17500 | 11400 | 0 | ||
| Add: | Profit apportion | -31710 | -42280 | -31710 | ||
| Closing Balances-2019 | 54625.2 | 67535.3 | 55839.5 | |||
| Net income statement after allocation to partners | ||||||
| Before allocation | -49000 | |||||
| Less: | Interest | 27800 | ||||
| Less: | Salary | 28900 | ||||
| -105700 | ||||||
| Amount to be adjusted | ||||||
| Angela | 30 | -31710 | ||||
| Diaz | 40 | -42280 | ||||
| Krause | 30 | -31710 | ||||
ekkarill92 answered 1 year agoRelated Solutions
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and Krause was formed when the partners contributed $50,000,
$79,000, and $80,000, respectively. Over the next three years, the
business reported net income and (loss) as follows:
2017
$
90,000
2018
62,000
2019
(45,000
)
During this period, each partner withdrew cash of $13,000 per
year. Krause invested an additional $7,000 in cash on February 9,
2018.
At the time that the partnership was created, the three partners
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Trial Balance
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Account
Number
Debit
Credit
101
Cash
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112
Accounts Receivable
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126
Supplies
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130
Prepaid Insurance
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729
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