Chapter 5
Partnerships
236
Analysis
Selena is not happy about how the profit is allocated. She is working twice as much as the
other partners. What can the other partners do to resolve this issue?
AP-4B (
4
)
Noemi Loop, Lilia Hopkin and Guy Scoggin perform in a band operating as a partnership.
According to the partnership agreement, Noemi receives a salary of $22,000, Lilia receives
a salary of $30,000, and Guy receives a salary of $28,000. They are also to receive nominal
interest of 5% on the capital at the end of the preceding year (Noemi’s capital—$1,000, Lilia’s
capital—$10,000, Guy’s capital—$20,000). The remainder is divided equally. During the year
the partners withdrew $22,000 each as an advance to their share of partnership earnings. The
band made $100,000 after paying all other expenses.
Required
a) Prepare a schedule showing changes in the partners’ capital during the year.
