Question

Betta, Gretta and Jetta operate a partnership business sharing profits and losses in the ratio of...

Betta, Gretta and Jetta operate a partnership business sharing profits and losses in the ratio of 5:3:2.

Their capital balances at the beginning of the year were $60,000, $40,000 and $30,000 respectively.

For the year ending June 30, 2020 the following information is given to you.

Net Income from operations $120,000

Salaries paid to Betta and Gretta were $500 per month.

Jetta was paid a bonus of $5,000 for the year.

All the partners were to receive interest on capital @6% per annum on their beginning capital balances.

Betta, Gretta and Jetta withdrew $6,000, $5,000 and $8,000 respectively.

Required:

Prepare a statement to show the ending capital account balances of the 3 partners at the end of June 30, 2020.

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Answer #1
Allocation of Net Income
Betta Gretta Jetta Total
Net Income for the year 120000
Salaries to Partners 6000 6000 0 12000
Remaining income 108000
Bonus to partner 5000 5000
Remaining income 103000
Interest on capital 3600 2400 1800 7800
Remaining income 95200
Share of Profit in 5:3:2 47600 28560 19040 95200
Total share 57200 36960 25840
Statement of Ending capital balance
Betta Gretta Jetta Total
Beginning balance of Capital 60000 40000 30000 130000
Add: Share of Net Income 57200 36960 25840 120000
Sub total 117200 76960 55840 250000
Less: Drawings -6000 -5000 -8000 -19000
Ending balance of Capital 111200 71960 47840 231000
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