Ask Question
19 September, 12:24

James, Keller, and Rivers have the following capital balances; $48,000, $70,000 and $90,000 respectively. Because of a cash shortage James invests an additional $12,000 on June 1st. Each partner withdraws $1,000 per month. James, Keller, and Rivers receive a salary of $13,000, $15,000 and $20,000, respectively, for work done during the year. Each partner receives interest of 8% on their weighted average capital balance without regard to normal drawings. Any remaining profits are split 20%, 30%, and 50% respectively. The net income for the year is $30,000. What are the ending capital balances for each partner?

+3
Answers (1)
  1. 19 September, 12:55
    0
    Capital balances of each partners

    James Keller River

    opening balance $48,000 $70,000 $90,000

    Additional Capital 12,000

    Salary 13,000 15,000 20,000

    Interest on capital 4,400 5,600 7200

    Drawings (12,000) (12,000) (12,000)

    share of loss (7040) (10560) (17600)

    closing balance 58,360 68,040 87,600

    Explanation:

    1. Interest on capital is based on weighted average capital balance without regard to normal drawings

    James = (8% * 48,000) + (8% * 12,000 * 7/12) = $4,400

    on the additional capital invested by James, interest on capital will be calculated for 7months

    Keller = 8% * 70,000 = $5,600

    River = 8% * 90,000 = 7200

    Appropriation

    Net income $30,000

    Interest on capital (4400 + 5600+7200) 17,200

    salary (13,000+15000+20000) 48,000 (65,200)

    share of loss : James 7,040

    keller 10,560

    River 17600 35,200
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “James, Keller, and Rivers have the following capital balances; $48,000, $70,000 and $90,000 respectively. Because of a cash shortage James ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers