Question
A partnership begins 2020 with the following capital balances: Ash, Capital $60,000 Birch, Capital $80,000 Cottonwood, Capital $100,000 The Articles of Partnership stipulates that profits
A partnership begins 2020 with the following capital balances: Ash, Capital $60,000 Birch, Capital $80,000 Cottonwood, Capital $100,000
The Articles of Partnership stipulates that profits and losses will be assigned as follows: Each partner will be allocated interest equal to 10 percent of the beginning capital balance. Birch will be allocated a $20,000 "salary". Any remaining profits and losses will be allocated on a 3:4:3 basis, respectively.
A. Assuming that the net income for 2020 is $50,000, how much does each partners capital balance increase? Show all computations.
B. Each partner has withdrawn the maximum amount allowed, $5,000 per year. What is each partners final capital balance at year end?
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