Reference no: EM132684594

Norr and Caylor established a partnership on January 1, 2019. 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 profits and losses:

1. 12% interest on the yearly beginning capital balance
2. $10 per hour of work that can be billed to the partnership's clients 
3. the remainder divided in a 3:2 ratio

The Articles of Partnership specified 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 2019, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 2020, 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 2019 and 2020.

Question 1: Determine the amount of net income allocated to each partner for 2019.

Question 2: Determine the balance in both capital accounts at the end of 2019.

Question 3: Determine the amount of net income allocated to each partner for 2020. (Round all calculations to the nearest whole dollar).

Question 4: Determine the balance in both capital accounts at the end of 2020 to the nearest dollar.