The January 1, 2014, balance sheet of the partnership of Linda Kingston and Jeannette Allen is shown below.

The partnership reported revenues of $80,000 and expenses of $55,000 for 2014. Neither partner withdrew funds from the partnership during the year. Kingston invested $8,000 in the firm on June 28, 2014.
Required
Compute the December 31,2014, capital balance for each partner under each of the following assumptions:
a. The partnership agreement does not specify how income is to be divided.
b. The partnership agreement specifies that Kingston receives 65 percent of income and Allen 35 percent.
c. The partnership agreement specifies that income is divided equally after paying each partner 10 percent interest on her weighted average capital balance.
d. The partnership agreement specifies that Kingston and Allen receive salaries of $12,000 and $8,000, respectively, and that each partner receives 5 percent interest on her capital balance at the beginning of the year. Salary and interest allocations are to be fully implemented. Any remaining income is to be divided equally.

Transcribed Image Text:

Assets Liabilities and Capital Cash $20,000 180,000 Other assets. CapitaKingston 56,000 84,000 $200,000 Total assets $200,000 Total liabilities and capital . . . . .