Question

In: Accounting

What was Young's total share of net income for the second year?


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.

Solutions

Expert Solution

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

ekkarill92 answered 2 years ago
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