Norr and Caylor
established a partnership on January 1, 2019. Norr invested cash of
$100,000 and Caylor invested $30,000 in cash and equipment with a book value of
$40,000 and fair value of $50,000. For both partners, the beginning
capital balance was to equal the initial investment. Norr and Caylor
agreed to the following procedure for sharing profits and losses:
12%
interest on the yearly beginning capital balance
$10
per hour of work that can be billed to the partnership’s clients
the
remainder divided in a 3:2 ratio
The Articles of
Partnership specified that each partner should withdraw no more than $1,000 per
month, which is accounted as direct reduction of that partner’s capital
balance.
For 2019, the
partnership’s income was $70,000. Norr had 1,000 billable hours, and
Caylor worked 1,400 billable hours. In 2020, the partnership’s income was
$24,000, and Norr and Caylor worked 800 and 1,200 billable hours
respectively. Each partner withdrew $1,000 per month throughout 2019 and
2020.
Complete the following:
Determine the amount of net
income allocated to each partner for 2019 and both capital accounts at
the end of 2019.
Determine the amount of net
income allocated to each partner for 2020. (Round all calculations to the
nearest whole dollar) and both capital accounts at the end of 2020 to the
nearest dollar.
