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 2018, 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, 2018.
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 2018 is $23,600. Each partner withdraws the allotted amount each month.
What are the ending capital balances for 2018?
Step by Step Answer:
Advanced Accounting
ISBN: 978-1259444951
13th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni