At the beginning of the current year, Meyers, Lincoln, and Kopinski formed a partnership to carry on


At the beginning of the current year, Meyers, Lincoln, and Kopinski formed a partnership to carry on their consulting practice. At that time, net assets of $59,000, $30,000, and $25,000 were contributed to the partnership by Meyers, Lincoln, and Kopinski, respectively. The partnership provided for the allocation of profits among the partners as follows:
1. All partners will receive 6% interest on their weighted-average capital balances, as defined. Capital balances will be the initial capital balances reduced by amounts withdrawn in excess of partners' salaries and asset dispositions, as discussed in item (5). Partners with a deficit balance will have their profit allocation reduced by the interest on such amounts.
2. Salaries for Meyers, Lincoln, and Kopinski are $120,000, $96,000, and $72,000, respectively. All salaries are withdrawn at the end of each month.
3. Each partner will also receive a bonus equal to 10% of his or her gross billings in excess of $400,000.
4. As compensation for her duties as office administrator, Kopinski will receive 10% of net income after reduction for items (1) through (3) above.
5. To the extent that assets initially contributed to the partnership are determined to be excessive and not operational in nature, they will be disposed of during the first year. Any gain or loss on the disposal of such assets will be allocated to the partner who initially contributed such assets. The net sales proceeds from the dispositions will be distributed to the respective partner and their capital balance will be reduced accordingly.
6. Remaining profits will be distributed equally among the partners.
The following information is relevant to the allocation of the current year's net income of $420,000:
1. On March 31, $20,000 of tangible assets contributed by Meyers were sold for $15,000.
2. On June 30, both Lincoln and Kopinski had drawings in excess of their salaries in the amount of $20,000 and $60,000, respectively. On September 30, Meyers withdrew $25,000 in excess of his salary.
3. Gross billings during the current year were $500,000, $380,000, and $450,000 for Meyers, Lincoln, and Kopinski, respectively.
Determine the final end-of-year capital balances for each partner, after all relevant closing entries have occurred.
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
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Advanced Accounting

ISBN: 978-1305084858

12th edition

Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng

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