Question
Assume Bert and Ernie have capital balances of $20,000 and $80,000, respectively. Bert is actively involved in running the business so he will receive a
Assume Bert and Ernie have capital balances of $20,000 and $80,000, respectively. Bert is actively involved in running the business so he will receive a salary allowance of $50,000. Ernie, on the other hand, is the financial backing for the business. Therefore, Ernie will receive an interest allowance of 12 percent on his beginning capital balance. The remainder will be allocated in the ratio of the partners beginning capital balances. If the partnership expects a profit of $150,000, what are the anticipated ending capital balances for the partners?
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