acc407 purkerson smith and traynor have operated a bookstore for a number of years a 491715

Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2011, capital balances were as follows:

Due to cash shortage, Purkerson invests and additional $8,000 in the business on April 1, 2011.

Each partner is allowed to withdraw $1,000 cash each month. The partners have used the same method of allocating profits and losses since the business’s inception. Each partner is given the following compensation allowance for work done in the busiiness. Purkerson, $18,000; Smith, $25,000 and Traynor, $8,000. Each partner is credited with interest equal to 10 percent of the average monthly capital balance for the year without regard for normal drawings. Any remaining profit or loss is allocated 4:2:4 to Purkerson, Smith, and Traynor, respectively. The net income for 2011 is $23,600. Each partner withdraws the allotted amount each month.