Answered: Capital balances and profit-sharing…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter15: Partnership Accounting

Section: Chapter Questions

Problem 3EA: The partnership of Tasha and Bill shares profits and losses in a 50:50 ratio, and the partners have...

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Question

Capital balances and profit-sharing percentages for the partnership of Man, Eme, and Fot partnership on January 1, 2021, are as follows:

Man Capital (36%) 140,000

Eme Capital (24%) 100,000

Fot Capital (40%) 160,000

Total 400,000

On January 3, 2021, the partners agree to admit Box into the partnership for a 25% interest in the capital and earnings for his investment in the partnership of $120,000. Partnership assets are not to be revalued.

Determine the capital balances of Man, Eme, Fot, and Box immediately after the admission of Box.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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