REQUIRED: Prepare a statement of partnership capital for the year ended December 31, 2011 — Ellen Fargo and Gary are partners who share profits losses percent respectively

Ellen, Fargo, and Gary are partners who share profits and losses 20 percent, 20 percent, and 60 percent, respectively, after Ellen and Fargo each receive a $12,000 salary allowance. Capital balances on January 1, 2011, are as follows:

Ellen (20%) …………….. $ 69,000

Fargo (20%) ……………… 85,500

Gary (60%) ……………… 245,500

During 2011, Gary invested an additional $20,000 in the partnership, and Ellen and Fargo each withdrew $12,000, equal to their salary allowances as provided by the profit and loss sharing agreement. The partnership net assets at December 31, 2011, were $481,000.

REQUIRED: Prepare a statement of partnership capital for the year ended December 31, 2011.

🔒

Unlock the complete assignment

You are viewing the free preview. Purchase this assignment once to reveal the complete resource.

$9.99 USD

Secure checkout is completed by Stripe.

Preliminary computation
Beginning capital ($69,000 + $85,500 + $245,500)	$400,000
Capital adjustments: Additional investment less withdrawals	(4,000)
	396,000
Ending capital	(481,000)
Net income	$ 85,000

		Ellen	Ellen	Fargo	Fargo	Gary	Gary	Total
Capital balance January 1	Capital balance January 1	$69,000	$69,000	$85,500	$85,500	$245,500	$245,500	$400,000
Add: Additional investment	Add: Additional investment					20,000	20,000	20,000
Deduct: Salary allowances	Deduct: Salary allowances	(12,000)	(12,000)	(12,000)	(12,000)			(24,000)
Net contributed capital	Net contributed capital	57,000	57,000	73,500	73,500	265,500	265,500	396,000
Income allocation (see	Income allocation (see
schedule)	schedule)	24,200	24,200	24,200	24,200	36,600	36,600	85,000
Capital balance December 31	Capital balance December 31	$81,200	$81,200	$97,700	$97,700	$302,100	$302,100	$481,000
Income allocation schedule:	Income allocation schedule:
	Total	Total	Ellen	Ellen	Fargo	Fargo	Gary	Gary
Income to divide	$85,000	$85,000
Salary allowances	(24,000)	(24,000)	$12,000	$12,000	$12,000	$12,000
Remainder to divide	61,000	61,000
Divided 20:20:60	(61,000)	(61,000)	12,200	12,200	12,200	12,200	$ 36,600	$ 36,600
Income allocation	0	0	$24,200	$24,200	$24,200	$24,200	$ 36,600	$ 36,600

REQUIRED: Prepare a statement of partnership capital for the year ended December 31, 2011 — Ellen Fargo and Gary are partners who share profits losses percent respectively

Unlock the complete assignment

SOLUTION