Question

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

Alfred, Capital	$	74,000
Bernard, Capital		84,000
Collins, Capital		94,000

The articles of partnership stipulate that profits and losses be assigned in the following manner:

• Each partner is allocated interest equal to 7 percent of the beginning capital balance.
• Bernard is allocated compensation of $18,000 per year.
• Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.
• Each partner is allowed to withdraw up to $6,000 cash per year.

Assuming that the net income is $84,000 and that each partner withdraws the maximum amount allowed, what is the balance in Collins capital account at the end of that year?

Multiple Choice

a) $100,580

B) $99,416

C) $113,924

D) $119,924

Answer 1

Collins capital account at the end of that year is $ 113,924.

Option C is correct ($ 113,924)