Question
Norr and Caylor established a partnership on January 1, 2018. Norr invested cash of $187,000 and Caylor invested $60,000 in cash and equipment with a
Norr and Caylor established a partnership on January 1, 2018. Norr invested cash of $187,000 and Caylor invested $60,000 in cash and equipment with a book value of $40,000 and fair value of $60,000. For both partners, the beginning capital balance was to equal the initial investment. Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month. For 2018, the partnership's income was $45,000. Norr had 1,200 billable hours, and Caylor worked 1,600 billable hours. Each partner withdrew $1,000 per month throughout 2018.
A) Determine the amount of net income allocated to each partner for 2018
B) Determine the ending capital balances for each partner for 2018.
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