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.
21. What was Eaton's total share of net loss for the first year?
A. $3,900 loss.
B. $11,700 loss.
C. $10,400 loss.
D. $24,700 loss.
E. $9,100 loss.
22. What was the balance in Young's Capital account at the end of the first year?
A. $120,900.
B. $118,300.
C. $126,100.
D. $80,600.
E. $111,500.
Salary | Interest @ 10% | Total Credits | Sharing Ratio | Withdrawal | ||
Young, Capital | $143,000 | 26000 | 14300 | 40300 | 5 | 13000 |
Eaton, Capital | $104,000 | 10400 | 10400 | 2 | 13000 | |
Thurman, Capital | $143,000 | 13000 | 14300 | 27300 | 3 | 13000 |
39000 | 39000 | 78000 | ||||
First Year net loss | ($26,000) | |||||
Add: addl loss | ($78,000) | |||||
Total Loss | ($104,000) | |||||
Loss distribution as per ratio | Loss | Credits | Net Loss | Capital balance | Withdrawal | Net capital balance |
Young-5 | -52000 | 40300 | -11700 | $143,000 | -13000 | 118300 |
Eaton-2 | -20800 | 10400 | -10400 | $104,000 | -13000 | 80600 |
Thurman-3 | -31200 | 27300 | -3900 | $143,000 | -13000 | 126100 |