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On January 1, Year 1, Harry, Hermione, and Ron form the partnership Magic Wands . Harry contributes his elder tree containing many branches suitable for
On January 1, Year 1, Harry, Hermione, and Ron form the partnership Magic Wands. | |||||||
Harry contributes his elder tree containing many branches suitable for making wands. | |||||||
The tree originally cost Harry $1,000 but now has an appraised value of $5,000. Herminone | |||||||
promises to provide accounting support, handle all contracts, human resource functions | |||||||
and similar functions while Ron promises to run the business on a day to day function. | |||||||
Hermione contributes $4,000 in start-up money while Ron can only contribute $1000 in start-up | |||||||
funds. Accordingly, the partnership agreement states that income is to be allocated accordingly: | |||||||
1. Each partner is to get a 10% return on their beginning capital balance. | |||||||
2. Ron is to receive $12,000 for operationg the business. | |||||||
3. The remaining income or losses is to be allocated to Harry, Hermione, and Ron | |||||||
on a ratio of 30%, 30%, and 40% | |||||||
4. Harry and Hermione can withdraw $500 a month each while Ron can withdraw $1,000. | |||||||
After great effort, the partnership is successful and earns income in each of the first three years: | |||||||
Year | Income | ||||||
1 | $ 15,000 | ||||||
2 | $ 45,000 | ||||||
3 | $ 60,000 | ||||||
Make tables to allocate income and show ending capital balance at the end of each of the three | |||||||
Years. |
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