Question

Saul Goodman, Jesse Pinkman, and Walter White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was the total capital balance for the partnership at December 31, 2021?

            A)    $936,000.           
            B)    $805,000.
            C)    $924,000.
            D)    $882,000.
            E)    $860,000.

Answer 1

Particulars	Goodman	Pinkman	White
Opening capital	1,25,000	1,75,000	2,50,00
Add: Interest on capital	12,500	17,500	25,000
Annual compensation		15,000
Less: withdrawal	(18,000)	(18,000)	(18,000)
Add: Profit(2,00,000-12,500-17,500-25000-15,000)= 1,30,000	26,000	52,000	52,000
Closing Capital as. on 31 st December 2020	1,45,500	2,41,500	3,09,000
Opening capital	1,45,500	2,41,500	3,09,000
Add: Interest	14,550	24,150	30,900
Annual compensation		15,000
Less: withdrawal	(18,000)	(18,000)	(18,000)
Add: profit (2,40,000-14,550-24,150-30,900-15,000)= 1,55,400	31,080	62,160	62,160
Closing balance as on 31st December 2021	1,73,130	3,24,810	3,84,060
Total capital	= 8,82,000