Question

A partnership begins its first year with the following capital balances:
Arthur, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000
Baxter, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Cartwright, Capital . . . . . . . . . . . . . . . . . . . . . . . . . 100,000

The articles of partnership stipulate that profits and losses be assigned in the following manner:
• Each partner is allocated interest equal to 10 percent of the beginning capital balance.
• Baxter is allocated compensation of $20,000 per year.
• Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.
• Each partner is allowed to withdraw up to $5,000 cash per year.
Assuming that the net income is $50,000 and that each partner withdraws the maximum amount allowed, what is the balance in Cartwright’s capital account at the end of that year?
a. $105,800.
b. $106,200.
c. $106,900.
d. $107,400.



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  • CreatedOctober 04, 2014
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