A partnership begins its first year with the following capital balances: Alfred, Capital . . . . . . . . . . . . .$ 50,000Bernard, Capital . . . . . . . . . . . . 60,000Collins, Capital . . . . . . . . . . . . . 70,000 The articles of partnership stipulate that profits and losses be assigned in the following manner:∙ Each partner is allocated interest equal to 5 percent of the beginning capital balance.∙ Bernard is allocated compensation of $18,000 per year.∙ Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.∙ Each partner is allowed to withdraw up to $5,000 cash per year.Assuming that the net income is $60,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year? Choose the correct.a. $70,800b. $86,700c. $73,500d. $81,700
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
A
Alfred, Capital . . . . . . . . . . . . .$ 50,000
Bernard, Capital . . . . . . . . . . . . 60,000
Collins, Capital . . . . . . . . . . . . . 70,000
The articles of partnership stipulate that
∙ Each partner is allocated interest equal to 5 percent of the beginning capital balance.
∙ Bernard is allocated compensation of $18,000 per year.
∙ Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.
∙ Each partner is allowed to withdraw up to $5,000 cash per year.
Assuming that the net income is $60,000 and that each partner withdraws the maximum amount
allowed, what is the balance in Collins capital account at the end of that year? Choose the correct.
a. $70,800
b. $86,700
c. $73,500
d. $81,700
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