Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At
Question:
Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2013, capital balances were as follows:
Purkerson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60,000
Smith. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Traynor ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Due to a cash shortage, Purkerson invests an additional $8,000 in the business on April 1, 2013. Each partner is allowed to withdraw $1,000 cash each month.
The partners have used the same method of allocating profits and losses since the business's inception:
• Each partner is given the following compensation allowance for work done in the business: Purkerson, $18,000; Smith, $25,000; and Traynor, $8,000.
• Each partner is credited with interest equal to 10 percent of the average monthly capital balance for the year without regard for normal drawings.
• Any remaining profit or loss is allocated 4:2:4 to Purkerson, Smith, and Traynor, respectively. The net income for 2013 is $23,600. Each partner withdraws the allotted amount each month. What are the ending capital balances for 2013?
Step by Step Answer:
Fundamentals of Advanced Accounting
ISBN: 978-0077667061
5th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik