Answer:
Capital balances of each partners
James Keller River
opening balance $48,000 $70,000 $90,000
Additional Capital 12,000
Salary 13,000 15,000 20,000
Interest on capital 4,400 5,600 7200
Drawings (12,000) (12,000) (12,000)
share of loss <u>(7040) </u> <u>(10560) </u> <u>(17600)</u>
closing balance <u>58,360</u> <u>68,040 </u> <u> 87,600</u>
Explanation:
1. Interest on capital is based on weighted average capital balance without regard to normal drawings
James =( 8% * 48,000) + ( 8%* 12,000 * 7/12) = $4,400
on the additional capital invested by James, interest on capital will be calculated for 7months
Keller = 8% * 70,000 = $5,600
River = 8% * 90,000 = 7200
Appropriation
Net income $30,000
Interest on capital(4400 + 5600+7200) 17,200
salary (13,000+15000+20000) <u>48,000</u> (65,200)
share of loss : James 7,040
keller 10,560
River 17600 35,200
