Question

A partnership begins its first year with the following capital balances:
Alfred, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000
Bernard, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Collins, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000
The articles of partnership stipulate that profits and losses be assigned in the following manner:
• Each partner is allocated interest equal to 5 percent of the beginning capital balance.
• Bernard is allocated compensation of $18,000 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 $60,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year?
a. $70,800.
b. $86,700.
c. $73,500.
d. $81,700.



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  • CreatedJanuary 08, 2015
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