On January 1, 2021, M and L formed a partnership ML upon capital contribution of 12,000,000 and
Question:
On January 1, 2021, M and L formed a partnership ML upon capital contribution of 12,000,000 and 8,000,000, respectively with capital interest ratio of 3:7 respectively. Based on the articles of co-partnership, they agreed to bring their capital balances in accordance with their capital interest ratio without the necessity of withdrawals or additional investment because L contributed special skills. The articles of co-partnership provides that profits or loss shall be distributed under the following terms:
-40,000 monthly salary to M and 60,000 monthly salary to L.
-The remainder on the basis of capital interest ratio. For the year ended December 31, 2021, the partnership net income of 500,000. During 2021, the partners regularly withdrew 20% of their monthly salary.
On January 1, 2022, P was admitted to the newly formed MPL partnership by paying personally the partners in the amount of 6,000,000 for 20% of their capital interest. As a result of the dissolution, the new MPL partnership fully amended the profit or loss agreement. P will have 20% share in the profit or loss while the original partners will share in the remainder based on their original capital interest ratio. For the year ended December 31, 2022, the partnership reported net loss of 1,000,000. M, A and P made 200,000, 300,000 and 400,000, withdrawals respectively during 2022. On January 1, 2023, D was admitted to the newly formed MPLD partnership by investing 4,000,000 for 25% interest in the partnership. The new articles of co-partnership provides that the total new agreed capitalization should be 20,000,000. The profit or loss agreement was also fully amended and will be in the ratio of 3:2:4:1, respectively for M, L, P and D. For the year ended December 1, 2023, the partnership reported net income of 2,000,000. M, L, P and D made 500,000, 200,000, 300,000 and 400,000, withdrawals respectively. On January 1, 2034, M and L decided to retire from the partnership receiving 3,000,000 and 10,000,000, respectively.
a. What is the capital balance of M on January 1, 2022, after the admission of P's -6,328,000
b. What is the capital balance of L on January 1, 2023 after the admission of D's -13,307,600
c. What is the capital balance of P on January 1, 2034 upon retirement of M and L's -9,870,400
Expert Answer:
a Ms capital balance on January 1 2022 is 5672000 3000000 500000 200000 2000000 500000 5672000 Expla... View the full answer
