Reference no: EM132713219
Problem - Norr and Caylor established a partnership on January 1, 2020. 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 pro?ts 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 allocated on a 3:2 ratio
The Articles of Partnership speci?ed 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 2020, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 2021, 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 2020 and 2021. Determine the amount of net income allocated to each partner for 2020.
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