Question

On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $32,000, $60,000, and $62,000, respectively. Over the next three years, the business reported net income and (loss) as follows:

2017	$	72,000
2018		44,000
2019		(27,000	)

During this period, each partner withdrew cash of $13,000 per year. Krause invested an additional $4,000 in cash on February 9, 2018.

At the time that the partnership was created, the three partners agreed to allocate all profits and losses according to a specified plan written as follows:

Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year.

Because of prior work experience, Angela is entitled to an annual salary allowance of $13,000 per year and Diaz is entitled to an annual salary allowance of $9,200 per year.

Any remaining profit will be split as follows: Angela, 30 percent; Diaz, 35 percent; and Krause, 35 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 40 percent; Diaz, 45 percent; and Krause, 15 percent.

Determine the ending capital balance for each partner as of the end of each of these three years. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

	2017	2018	2019
Angela's ending balance
Diaz's ending balance
Krause's ending balance

Answer 1

	Angela			Diaz			Krause
Year 2017			Year 2017			Year 2017
Capital Contributed	32,000		Capital Contributed	60,000		Capital Contributed	62,000
Cash Withdrawal	(13,000)		Cash Withdrawal	(13,000)		Cash Withdrawal	(13,000)
Interest on Capital	3,200		Interest on Capital	6,000		Interest on Capital	6,200
Salary Allowance	13,000		Salary Allowance	9,200		Salary Allowance	-
Profit appropriation 30% of 34,400	10,320		Profit appropriation 35% of 34,400	12,040		Profit appropriation 35% of 34,400	12,040
Ending Capital of 2017	45,520		Ending Capital of 2017	74,240		Ending Capital of 2017	67,240
Year 2018
Begininng Capital	45,520		Begininng Capital	74,240		Begininng Capital	67,240
Cash Withdrawal	(13,000)		Cash Withdrawal	(13,000)		Cash Withdrawal	(13,000)
Capital Invested	-		Capital Invested	-		Capital Invested	4,000
Interest on Capital	4,552		Interest on Capital	7,424		Interest on Capital	6,724
Salary Allowance	13,000		Salary Allowance	9,200		Salary Allowance	-
Profit appropriation 30% of 3,100	930		Profit appropriation 35% of 3,100	1,085		Profit appropriation 35% of 3,100	1,085
Ending Capital of 2018	51,002		Ending Capital of 2018	78,949		Ending Capital of 2018	66,049
Year 2019
Begininng Capital	51,002		Begininng Capital	78,949		Begininng Capital	66,049
Cash Withdrawal	(13,000)		Cash Withdrawal	(13,000)		Cash Withdrawal	(13,000)
Interest on Capital	5,100		Interest on Capital	7,895		Interest on Capital	6,605
Salary Allowance	13,000		Salary Allowance	9,200		Salary Allowance	-
Loss appropriation 40% of 68,800	(27,520)		Loss appropriation 45% of 68,800	(30,960)		Loss appropriation 15% of 68,800	(10,320)
Ending Capital of 2019	28,582		Ending Capital of 2019	52,084		Ending Capital of 2019	49,334

Working:

Profit / (loss) to be appropriated to partners:

Year	2017	2018	2019
Profit / (Loss) before appropriation	72,000	44,000	(27,000)
Interest on Partners Capital	15,400	18,700	19,600
Partners Salary	22,200	22,200	22,200
Profit / (Loss) after appropriation	34,400	3,100	(68,800)