The Raney and Kiser partnership agreement stipulates that profits and losses will be shared equally after salary allowances of $160,000 for Raney and $80,000 for Kiser. At the beginning of the year, Raney's Capital account had a balance of $320,000, while Kiser' Capital account had a balance of $280,000. Net income for the year was $200,000. The balance of Kiser' Capital account at the end of the year after closing is

Question

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Firstly, we need to calculate the total salary allowances which equal to $240,000 ($160,000 for Raney and $80,000 for Kiser).

Next, we need to calculate the total profit to be allocated after the salary allowances. This can be done by subtracting the total salary allowances from the net income:

$200,000 - $240,000 = -$40,000

This negative number means that the partnership had a net loss after the salary allowances. However, since the partnership agreement stipulates that profits and losses are shared equally after the salary allowances, this means that the partners will share this loss equally as well.

To calculate the ending balance for Kiser's Capital account, we need to take Kiser's beginning Capital balance of $280,000 and add half of the net loss (-$20,000) since losses are shared equally:

$280,000 - $20,000 = $260,000

Finally, we need to add Kiser's share of the net income to this balance:

$260,000 + ($200,000/2) = $340,000

Therefore, the balance of Kiser's Capital account at the end of the year after closing is $340,000.

The Raney and Kiser Partnership Agreement Stipulates That Profits and Losses