On January 1, 2020, the dental partnership of Angela, Diaz, and Krause was formed when the partners
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Question:
On January 1, 2020, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $34,000, $62,000, and $64,000, respectively. Over the next three years, the business reported net income and (loss) as follows:
2020 | $ | 74,000 | |
2021 | 46,000 | ||
2022 | (29,000 | ) | |
During this period, each partner withdrew cash of $15,000 per year. Krause invested an additional $6,000 in cash on February 9, 2021.
At the time that the partnership was created, the three partners agreed to allocate all profits and losses according to a specified plan written as follows:
- Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year.
- Because of prior work experience, Angela is entitled to an annual salary allowance of $14,000 per year, and Diaz is entitled to an annual salary allowance of $9,400 per year.
- Any remaining profit will be split as follows: Angela, 25 percent; Diaz, 45 percent; and Krause, 30 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 35 percent; Diaz, 55 percent; and Krause, 10 percent.
Prepare a schedule that determines the ending capital balance for each partner as of the end of each of these three years
Related Book For
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
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