Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2021, capital balances were as

Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2021, capital balances were as follows:

Purkerson $ 76,000
Smith 56,000
Traynor 30,000

Due to a cash shortage, Purkerson invests an additional $16,000 in the business on April 1, 2021.

Each partner is allowed to withdraw $1,000 cash each month.

The partners have used the same method of allocating profits and losses since the business's inception:

  • Each partner is given the following compensation allowance for work done in the business: Purkerson, $11,000; Smith, $21,000; and Traynor, $4,000.
  • Each partner is credited with interest equal to 20 percent of the average monthly capital balance for the year without regard for normal drawings.
  • Any remaining profit or loss is allocated 4:3:3 to Purkerson, Smith, and Traynor, respectively. The net income for 2021 is $20,000. Each partner withdraws the allotted amount each month.

Prepare a schedule showing calculations for the partners' 2021 ending capital balances. (Amounts to be deducted should be indicated with minus sign.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions