Reference no: EM132920980
Question - Jose and mario begin a partnership on january 1, 2001. Jose invest 400,000 as well as inventory costing 150,000 but with a current value. The partnership also accepts responsibility for a 100,000 notes payable owed in connection with this building.
The partners agree to begin operation with equal capital balances. The articles of partnership also provide that at the end of the each year profit and losses allocated as follows:
1. For managing the business, jose is credited with a bonus of partnership income after subtracting the bonus. No bonus is accrued if the partnership records a loss.
2. Both partners are entitled to interest equal to 10 percent of the average capital balances for the year without regard to the income or drawing of that year.
3. Any remaining profit or loss is divided 60 % to jose and 40% to mario.
4. Each partner is allowed to withdraw 8,000 per month in cash from the business.
On October 1, 2001, Jose invests an additional 120,000 cash in the business. For 2001 the partnership report income of 330,000. All allowed drawings were taken by partners.
Romeo and employee, is allowed to join the partnership on january 1,2002. The new partner is invests 660,000 into the business for a one interest in the partnership property. The revised partnership agreement still allows for both the bonus to jose as well as 10% interest, but all remaining profits and losses are now split 40% to jose and remeo with the remaining 20% of mario. Romeo is entitled to 8,000 per month drawings.
Mario chooses to withdraw from the partnership a few years later. After negotiations, all parties agree that Mario should be paid a 900,000 settlement. The capital balances on that date were as follows:
jose capital - 880,000
mario capital - 780,000
romeo capital - 720,000
Assuming that the bonus method is used exclusively by this partnership.
Required -
What the amount of capital credited to Jose upon formation must be?
What the share of Mario on the partnership net income must be?
What the capital credited to Romeo must be?
What the capital balances of Jose immediately after the withdrawal of Mario?