Question
In: Accounting
13. The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on...
13.
The capital accounts of Harrison and Marti have balances of
$160,000 and $110,000, respectively, on January 1, the beginning of
the current fiscal year. On April 10, Harrison invested an
additional $20,000. During the year, Harrison and Marti withdrew
$96,000 and $78,000, respectively, and net income for the year was
$264,000. The articles of partnership make no reference to the
division of net income.
Based on this information, the statement of partners' equity would
show what amount as total capital for the partnership on December
31?
a.$52,000
b.$164,000
c.$216,000
d.$380,000
Solutions
Expert Solution
Correct Answer-- $380,000.
Calculations and Explanations
|
Schedule of Partner's capital |
||||
|
Working |
Harrison |
Marti |
Total |
|
|
(A) |
Beginning Balances |
$ 160,000.00 |
$ 110,000.00 |
$ 270,000.00 |
|
(B) |
Addition made during Year |
$ 20,000.00 |
$ - |
$ 20,000.00 |
|
(C ) |
Profit during the Year |
$ 132,000.00 |
$ 132,000.00 |
$ 264,000.00 |
|
(D)=(A+B+C) |
Gross capital at the End |
$ 312,000.00 |
$ 242,000.00 |
$ 554,000.00 |
|
(E) |
Less: Withdrawals |
$ 96,000.00 |
$ 78,000.00 |
$ 174,000.00 |
|
(D-E) |
Net Ending Capital balances |
$ 216,000.00 |
$ 164,000.00 |
$ 380,000.00 |
|
Total Capital for the Partnership in Statement of Partnership is $380,000. |
Profit earned by partnership is transferred to partner’s capital account in ratio of 1:1 if there is no reference of distribution of profit in Article of partnership.
Another transaction that increases Partner’s capital is Additions made by partners to business in the form of either Cash or otherwise.
Profit distributed is added to partner’s capital account. Any withdrawals made during the year are deducted from partner’s capital account.
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