Answer to Question #120849 in Accounting for Yahra Daianne

Question

James, Keller, and Rivers have the following capital balances; P48,000, P70,000 and P90,000 respectively. Because of a cash shortage James invests an additional P12,000 on June 1st. Each partner withdraws P1,000 per month. James, Keller, and Rivers receive a salary of P13,000, P15,000 and P20,000, 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 P30,000.

Answer 1

1. Interest of capital

James

$0.08\times48000+0.08\times12000\times\frac{7}{12}=4400$

Keller

$0.08\times7000=5600$

Rivers

$0.08\times90000=7200$

2.Loss

4400+5600+7200+13000+15000+20000=65 200

65 200-30000-35 200

$35 200\times0.2=7040$

$35200\times0.3=10560$

$35 200\times0.5=17 600$

2.capital balances on end:

$James=48000+12000+13000+4400-1000\times12-7040=58 360$

$Keller=70 000+15000+5600-1000\times12-10560=68 040$

$Rivers=90000+20000+7200-1000\times12-17060=87 600$