A partnership begins its first year of operations with the following capital balances:Allegan, Capital$ 96,000Berrien, Capital86,000Kent, Capital96,000According to the articles of partnership, all profits will be assigned as follows:Allegan will be awarded an annual salary of $20,000 with $10,000 assigned to Kent.The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year.The remainder will be assigned on a 5:2:3 basis, respectively.Each partner is allowed to withdraw up to $7,000 per year.The net loss for the first year of operations is $36,000, and net income for the subsequent year is $30,000. Each partner withdraws the maximum amount from the business each period. Year One Ending Capital BalanceAlleganBeginning CapitalNet LossDrawingsBerrienKentYear Two Ending Capital BalanceAlleganBeginning CapitalNet LossDrawingsBerrien Kent

YEAR ONE AlleganBerrienKentTotalNet Loss $(36,000)Less: Interest 10% of beg.…

Answered: Year One Ending Capital Balance Allegan…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter21: Partnerships

Section: Chapter Questions

Problem 34P

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Question

A partnership begins its first year of operations with the following capital balances:

Allegan, Capital	$ 96,000
Berrien, Capital	86,000
Kent, Capital	96,000

According to the articles of partnership, all profits will be assigned as follows:

Allegan will be awarded an annual salary of $20,000 with $10,000 assigned to Kent.
The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year.
The remainder will be assigned on a 5:2:3 basis, respectively.
Each partner is allowed to withdraw up to $7,000 per year.

The net loss for the first year of operations is $36,000, and net income for the subsequent year is $30,000. Each partner withdraws the maximum amount from the business each period.

Year One Ending Capital Balance
Allegan
Beginning Capital
Net Loss
Drawings
Berrien
Kent
Year Two Ending Capital Balance
Allegan
Beginning Capital
Net Loss
Drawings
Berrien Kent

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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