Question

Bert and Ernie formed a partnership in 2003 to produce and sell puppets. At the time the partnership was formed, it was agreed that Bert would oversee the day- to- day operations for which he would receive a salary allowance of $ 30,000. Ernie, on the other hand, provided most of the capital to start the business, so he will receive an interest allowance of 9 percent of his beginning capital balance. Finally, the partners agreed that the remainder would be allocated in the proportion of the ending capital balances before allocation. The beginning capital balances and expected ending capital balances of the partners before income allocation are
Required:
A. Determine expected ending capital balances if the partners predict a business income of $ 150,000 for the period.
B. Determine expected ending capital balances if the partners predict a business income of $ 50,000 for the period.
C. Determine expected ending capital balances if the partners predict a business loss of $ 40,000 for the period.


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  • CreatedMarch 25, 2015
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