Problem 14-22 (LO 14-4, 14-5, 14-6) Purkerson, Smith, and Traynor have operated
ID: 2471277 • Letter: P
Question
Problem 14-22 (LO 14-4, 14-5, 14-6)
Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2015, capital balances were as follows:
Due to a cash shortage, Purkerson invests an additional $14,000 in the business on April 1, 2015.
The partners have used the same method of allocating profits and losses since the business's inception:
Each partner is given the following compensation allowance for work done in the business: Purkerson, $10,000; Smith, $20,000; and Traynor, $6,000.
Each partner is credited with interest equal to 20 percent of the average monthly capital balance for the year without regard for normal drawings.
Any remaining profit or loss is allocated 3:2:5 to Purkerson, Smith, and Traynor, respectively. The net income for 2015 is $30,000. Each partner withdraws the allotted amount each month.
What are the ending capital balances for 2015?
Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2015, capital balances were as follows:
Explanation / Answer
Capital a/c
Dr. Cr.
Partculars Purkerson Smith Traynor Particulars Purkerson Smith Traynor To Cash 12000 12000 12000 By Balance b/d 74000 54000 30000 By cash 14000 To Balance c/d 109800 78800 45000 By work allowance 10000 20000 6000 By Interest Exp 14800 10800 6000 By Profit 7 Loss 9000 6000 15000 121800 90800 57000 121800 90800 57000