REFERENCE: Ref 14_06 Norr and Caylor Established a Partnership on January 1,2007.Norr Invested

question 21

Essay

REFERENCE: Ref 14_06
Norr and Caylor established a partnership on January 1,2007.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners,the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.
For 2007,the partnership's income was $70,000.Norr had 1,000 billable hours,and Caylor worked 1,400 billable hours.In 2008,the partnership's income was $24,000,and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2007 and 2008.
-Determine the balance in both capital accounts at the end of 2008 to the nearest dollar.

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Definitions:

Issuing Bonds

The process by which corporations or governments raise capital by selling debt securities, promising to repay the principal amount with interest at a later date.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, typically noted on an annual basis.

Futures Contracts

Agreements to buy or sell an asset at a predetermined future date and price.

Spot Price

The present market rate at which a specific asset like a commodity, currency, or security is available for purchase or sale with immediate delivery.