Question

A partnership begins its first year of operations with the following capital balances:
Winston, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $110,000
Durham, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Salem, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
According to the articles of partnership, all profits will be assigned as follows:
• Winston will be awarded an annual salary of $20,000 with $10,000 assigned to Salem.
• The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year.
• The remainder will be assigned on a 5:2:3 basis, respectively.
• Each partner is allowed to withdraw up to $10,000 per year.
Assume that the net loss for the first year of operations is $20,000 and that net income for the subsequent year is $40,000. Assume also that each partner withdraws the maximum amount from the business each period. What is the balance in Winston’s capital account at the end of the second year?
a. $102,600.
b. $104,400.
c. $108,600.
d. $109,200.



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  • CreatedOctober 04, 2014
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