Missouri, Connecticut, and Oklahoma have been partners throughout 2021. Their average balances and their balances at the end of the year before closing the nominal accounts are as follows: Partner Average Balances Balances, 12/31/21 Missouri P97,500 P70,000 Connecticut 7,300 11,800 Oklahoma 4,250 1,700 (debit balance) The income for 2021 is P103,500 before charging partners’ salary allowances and before payment of interest on average balances at the agreed rate of 4% per annum. Annual salary allocations are P12,500 to Missouri, P8,750 to Connecticut, and P6,250 to Oklahoma. The balance of the profits is to be allocated at the rate of 60% to Missouri, 10% to Connecticut, and 30% to Oklahoma. It is intended to distribute cash to the partners so that, after credits and allocations have been made as indicated in the preceding paragraph, the balances in the partners’ accounts will be proportionate to their residual profit-sharing ratios. None of the partners is to invest additional cash, but they wish to distribute the lowest possible amount of cash. How much is the capital balances of Missouri at the end of the year?
Missouri, Connecticut, and Oklahoma have been partners throughout 2021. Their average balances and their balances at the end of the year before closing the nominal accounts are as follows: Partner Average Balances Balances, 12/31/21 Missouri P97,500 P70,000 Connecticut 7,300 11,800 Oklahoma 4,250 1,700 (debit balance) The income for 2021 is P103,500 before charging partners’ salary allowances and before payment of interest on average balances at the agreed rate of 4% per annum. Annual salary allocations are P12,500 to Missouri, P8,750 to Connecticut, and P6,250 to Oklahoma. The balance of the profits is to be allocated at the rate of 60% to Missouri, 10% to Connecticut, and 30% to Oklahoma. It is intended to distribute cash to the partners so that, after credits and allocations have been made as indicated in the preceding paragraph, the balances in the partners’ accounts will be proportionate to their residual profit-sharing ratios. None of the partners is to invest additional cash, but they wish to distribute the lowest possible amount of cash. How much is the capital balances of Missouri at the end of the year?
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter19: Accounting For Partnerships
Section: Chapter Questions
Problem 7SPA
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Concept explainers
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.
Question
Missouri, Connecticut, and Oklahoma have been partners throughout 2021. Their average balances and their balances at the end of the year before closing the nominal accounts are as follows:
Partner Average Balances Balances, 12/31/21
Missouri P97,500 P70,000
Connecticut 7,300 11,800
Oklahoma 4,250 1,700 (debit balance)
The income for 2021 is P103,500 before charging partners’ salary allowances and before payment of interest on average balances at the agreed rate of 4% per annum. Annual salary allocations are P12,500 to Missouri, P8,750 to Connecticut, and P6,250 to Oklahoma. The balance of the profits is to be allocated at the rate of 60% to Missouri, 10% to Connecticut, and 30% to Oklahoma.
It is intended to distribute cash to the partners so that, after credits and allocations have been made as indicated in the preceding paragraph, the balances in the partners’ accounts will be proportionate to their residual profit-sharing ratios. None of the partners is to invest additional cash, but they wish to distribute the lowest possible amount of cash.
How much is the capital balances of Missouri at the end of the year?
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