Problem $13-5($LO A$)$ Allocation of profits and determination of capital balances. The following information is relevant to the allocation of the current year's net income of

$$420,000$ :

On March $31,$$$20,000$ of tangible assets contributed by Meyers were sold for $$15,000.$

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.

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.

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 part$-$

nership provided for the allocation of profits among the partners as follows:

All partners will receive $6\%$ interest on their weighred$-$average capital balances, as defined.

Capital balances will be the initial capital balances reduced by amounts withdrawn in excess

of partners' salaries and asser dispositions, as discussed in item $(5).$ Partners with a deficit bal$-$

ance will have their profit allocation reduced by the interest on such amounts.

Salaries for Meyers, Lincoln, and Kopinski are $$120,000,$$$96,000,$ and $$72,000,$ respec$-$

tively. All salaries are withdrawn at the end of each month.

Each partner will also receive a bonus equal to $10\%$ of his or her gross billings in excess of

$$400,000.$

As compensation for her duties as office administrator, Kopinski will receive $10\%$ of net

income after reduction for items $(1)$ through $(3)$ above.

To the extent that assets initially contributed to the partnership are determined to be exces$-$

sive and not operational in narure, 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.

Remaining profits will be distributed equally among the partners.