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 $60,000
Smith 40,000
Traynor 20,000
Due to a cash shortage, Purkerson invests an additional $8,000 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, $18,000; Smith, $25,000; and Traynor, $8,000. Each partner is credited with interest equal to 10 percent of the average monthly capital balance for the year without regard for normal drawings. Any remaining profit or loss is allocated 4:2:4 to Purkerson, Smith, and Traynor, respectively. The net income for 2021 is $23,600. Each partner withdraws the allotted amount each month.
Required:
Prepare a schedule showing calculations for the partners' 2021 ending capital balances.
Answers: 1
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Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At t...
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