Dutcher, OConnor, and Gilchrist open an accounting practice on January 1, 2017 in Des Moines, Iowa to be operated as a partnership. To establish the business, Dutcher contributed a building with a book value of $20,000 and an appraised value of $150,000. The $50,000 loan on the building will be assumed by the partnership. OConnor contribution cash of $75,000 and computer equipment with a book value of $20,000 and an appraised value of $25,000. Gilchrist contributed cash of $85,000 and office furniture with a book value of $20,000 and an appraised value of $15,000. The partnership operates on a calendar year.

The articles of partnership stipulate the following:

• Monthly withdrawals of $1,000 are allowed for each partner.
• Net income is to be allocated as follows:
  • OConnor receives a compensation allowance of $2,500 per month for administrative duties.
  • Interest of 10% is to be allocated on the basis of beginning of year capital balances (ending balance from prior year).
  • Remainder of profit or loss shared in the following ratios:
    • Dutcher 40%
    • OConnor 40%
    • Gilchrist 20%

Net partnership income for 2017 was $100,000. Dutcher took no withdrawals from partnership in 2017, OConnor took withdrawals of $500 per month in 2017, and Gilchrist took withdrawals of $1,000 per month in 2017.