Reference no: EM133164492
Question - On January 1, 2020, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $30,000, $59,000, and $61,000, respectively. Over the next three years, the business reported net income and (loss) as follows:
2020 $71,000
2021 43,000
2022 (26,000)
During this period, each partner withdrew cash of $12,000 per year. Krause invested an additional $6,000 in cash on February 9, 2021.
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 $12,500 per year, and Diaz is entitled to an annual salary allowance of $9,100 per year.
- Any remaining profit will be split as follows: Angela, 20 percent; Diaz, 30 percent; and Krause, 50 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 30 percent; Diaz, 40 percent; and Krause, 30 percent.
Required - Prepare a schedule that determines the ending capital balance for each partner as of the end of each of these three years.