Norr and Caylor Established a Partnership on January 1, 2012

question 31

Essay

Norr and Caylor established a partnership on January 1, 2012. 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 2012, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 2013, 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 2012 and 2013.
Determine the amount of net income allocated to each partner for 2013. (Round all calculations to the nearest whole dollar).

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Definitions:

Sociologists

Experts or scientists who study societies, examining the structures, systems, and dynamics of human interaction and social behavior.

Equilibrium Theory

The assertion that a system’s natural state is one of balance and harmony.

Social Change

The transformation over time of cultural norms, values, societal structures, and behaviors, often driven by conflict, innovation, and geopolitical shifts.

Crazes

Intense but short-lived fads or trends that capture a large following or great enthusiasm for a brief period.