Question: Rivera Sampson and Elliott are partners in a commercial plumbing

Rivera, Sampson, and Elliott are partners in a commercial plumbing business. Rivera and Sampson have also started another contracting company and have cash flow needs which require periodic distributions from the partnership. In order to deal fairly with the level of partnership withdrawals, the partnership agreement calls for profit sharing as follows:
‘‘Average net capital’’ is determined by netting the partners’ drawing accounts against their capital accounts and weighting the net amounts for the appropriate portion of the year. On March 31 and September 30, $40,000 is allocated to each partner’s capital account in anticipation of the annual actual amount of profit. Activity in the drawing and capital accounts is as follows for the current calendar year:
Sampson had loaned the partnership money in the past, and the transaction was properly classified as a loan payable on the statements of the partnership. On September 30, the loan and accrued interest totaling $15,000 were converted from a loan payable to a capital investment in the partnership.
Determine how the current year profit of $330,000 is to be allocated among the partners.

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  • CreatedApril 13, 2015
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