In: Accounting
A partnership began its first year of operations with the following capital balances:
Young, Capital: $143,000
Eaton, 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 with $13,000 salary assigned 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.
What was Young's total share of net income for the second year?
Select one:
a. $17,160 income.
b. $4,160 income.
c. $19,760 income.
d. $17,290 income.
e. $28,080 income.
answer : e. $28080 income | |||||
Details: | |||||
Net Income | young | Eaton | Thurman | ||
Yr1 OB | -26000 | 143000 | 104000 | 143000 | |
Salary | -39000 | 26000 | 13000 | ||
Interest | -39000 | 14300 | 10400 | 14300 | (10% of Op capi) |
sub total | -104000 | ||||
Sharing bal. | 104000 | -52000 | -31200 | -20800 | (5:3:2) |
Withdrawal | -13000 | -13000 | -13000 | ||
yr1 CB | 0 | 118300 | 70200 | 136500 | |
YR2 OB | 52000 | 118300 | 70200 | 136500 | |
Salary | -39000 | 26000 | 13000 | ||
Interest | -32500 | 11830 | 7020 | 13650 | (10% of Op capi) |
sub total | -19500 | ||||
Sharing bal. | 19500 | -9750 | -5850 | -3900 | (5:3:2) |
yr 2 CB | 0 | 146380 | 71370 | 159250 | |
less:Yr's OB | 118300 | ||||
Total Share of Net Income | 28080 |