Question

A and b are partners. a has $50,000 in his capital account and b has $75,000 at the beginning of the year. a receives a salary of $15,000 and b receives $12,000. each partner receives 5% of the beginning balance of their capital accounts. the remainder is split 45% to a and 55% to

b. net income for the year was $125,000. what is the amount of each capital account at year-end?

Answer 1

Prepare the profit and loss appropriation account as follows In the debit side
A's salary 15000
B's salary 12000
A's interest on capital 2500
B's interest on capital 3750 Total=33250

In the credit side
Net income 125000

The difference between the debit side and the credit side would be share profit of partner A and B 125000-33250=91750

A's share profit=91750×0.45=41287.5
B's share profit=91750×0.55=50462.5

After preparing the profit and loss appropriation account prepare capital account of each partner as follows

A's capital account=Beginning balance+salary+interest on capital+share profit

A's capital
account=50,000+15,000+2,500 +41,287.5=108,787.5...(ending balance) answer

B's capital account=Beginning balance+salary+interest on capital+share profit

B's capital account=75,000+12,000+3,750 +50,462.5=141,212.5...(ending balance) answer

Hope it helps!