Partnership income allocation
Timmy and Lassie have been operating an accounting firm as partners for a number of years, and at the beginning of 2011, their capital balances were $60,000 and $75,000, respectively. During 2011, Timmy invested an additional $10,000 on April 1 and withdrew $6,000 on August 30. Lassie withdrew $12,000 on May 1 and withdrew another $6,000 on November 1. In addition, Timmy and Lassie withdrew their salary allowances of $18,000 and $24,000, respectively. At year end 2011, total capital of the Timmy and Lassie partnership was $182,000. Timmy and Lassie share income after salary allowances in a 60:40 ratio.
REQUIRED
1. Determine average capital balances for Timmy and Lassie for 2011.
2. Allocate 2011 partnership income to Timmy and Lassie.