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 Smith Traynor $ 88,000 68,000 20,000 Due to a cash shortage, Purkerson invests an additional $14,000 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, $27,000; 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 $30,000. 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.)
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 Smith Traynor $ 88,000 68,000 20,000 Due to a cash shortage, Purkerson invests an additional $14,000 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, $27,000; 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 $30,000. 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.)
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter12: Accounting For Partnerships And Limited Liability Companies
Section: Chapter Questions
Problem 3PA
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Transcribed Image Text: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
Smith
Traynor
●
Due to a cash shortage, Purkerson invests an additional $14,000 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:
$ 88,000
68,000
20,000
Each partner is given the following compensation allowance for work done in the business: Purkerson, $11,000; Smith, $27,000; 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 $30,000.
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.)
Beginning balances
Additional contribution
Net income
Drawings
Ending capital balances
PURKERSON, SMITH, and TRAYNOR
Statement of Partners' Capital
For the Year Ending December 31, 2021
Purkerson
Smith
Traynor
Totals
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