Question

8.Cleary, Wasser, and Nolan formed a partnership on January 1, 2017, and made capital contributions of $100,000 (Cleary), $150,000 (Wasser), and $200,000 (Nolan), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $10,000 to Wasser; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Cleary; (b) 40% for Wasser; and (c) 40% for Nolan. Net income was $150,000 in 2017 and $180,000 in 2018. Each partner withdrew $1,000 for personal use every month during 2017 and 2018. What was Wasser's capital balance at the end of 2018

Answer 1

Answer:

$201,000

Explanation:

The computation of the Wasser capital balance at the end of 2018 is shown below:

Particulars                              Clearly     Wasser          Nolan              Total

Beginning capital Balances $100,000    $150,000     $200,000

Add: Interest on above capital $10,000   $15,000        $20,000 $45,000

Add: Annual compensation                      $10,000                           $10,000

Add:  Profit distribution

at 20:40:40 ratio                     $19,000    $38,000     $38,000       $95,000

Less: Drawings

($1,000 × 12 months)           -$12,000     -$12,000     -$12,000

Ending balance                   $117,000     $201,000    $246000

The $95,000 is come from

= $150,000 - $45,000 - $10,000

= $95,000

We simply added the interest on capital, annual compensation, profit and deduct the interest on drawings so that the ending capital balance could come