Question

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

Winston, Capital	$	88,000
Durham, Capital		78,000
Salem, Capital		88,000

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

• Winston will be awarded an annual salary of $12,000 with $6,000 assigned to Salem.
• 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 $10,000 per year.

The net loss for the first year of operations is $32,000 and net income for the subsequent year is $26,000. Each partner withdraws the maximum amount from the business each period. What is the balance in Winston’s capital account at the end of the second year?

Multiple Choice

a) $61,100

b) $73,610

c) $63,610

d) $69,210

Answer 1