c

Ando, Dadd, and Porter formed a partnership on January 1, 2017. Ando invested $60,000, Dadd $60,000 and Porter $140,000. Ando will manage the store and work 40 hours per week in the store. Dadd will work 20 hours per week in the store, and Porter will not work. Each partner withdrew 40 percent of his income distribution during 2017. If there was no income distribution to a partner, there were no withdrawals of cash.

Instructions

Compute the partners' capital balances at the end of 2017 under the following independent conditions: (Hint: Use T accounts to determine each partner's capital balances.)

(1) Net income is $120,000 and the income ratio is Ando 40%, Dadd 35%, and Porter 25%.

(2) Net income is $125,000 and the partnership agreement only specifies a salary of $50,000 to Ando and $30,000 to Dadd.

(3) Net income is $76,000 and the partnership agreement provides for (a) a salary of $40,000 to Ando and $40,000 to Dadd, (b) interest on beginning capital balances at the rate of 10%, and (c) any remaining income or loss is to be shared by Ando 40%, Dadd 35%, and Porter 25%.