Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and $180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010 and 2011.
-What was Cleary's capital balance at the end of 2010?

Question

Quizplus · Accepted Answer

Cleary's interest for the year 2010 would be:
10% x $100,000 = $10,000
Cleary's compensation for 2010 would be:
$10,000
Cleary's share of the remaining income would be:
20% x ($150,000 - $10,000 - $10,000 - ($1,000 x 12)) = $21,600
Therefore, Cleary's total share of income for 2010 would be
$10,000 + $10,000 + $21,600 = $41,600
Cleary's capital balance at the end of 2010 would be:
$100,000 + $41,600 = $141,600
Since Cleary withdrew $12,000 for personal use during 2010, Cleary's capital balance at the end of 2010 would be:
$141,600 - $12,000 = $129,600
Thus, the answer is B) $129,000.

Cleary, Wasser, and Nolan Formed a Partnership on January 1