A partnership begins its first year of operations with the following capital balances:
|
Winston, Capital |
$110,000 |
|
Durham, Capital |
80,000 |
|
Salem, Capital |
110,000 |
According to the articles of partnership, all profits will be assigned as follows:
• Winston will be awarded an annual salary of $20,000 with $10,000 assigned to Salem.
• The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year.
• The remainder will be assigned on a 5:2:3 basis, respectively.
• Each partner is allowed to withdraw up to $10,000 per year.
Assume that the net loss for the first year of operations is $20,000 and that net income for the subsequent year is $40,000. Assume also that each partner withdraws the maximum amount from the business each period. What is the balance in Winston’s capital account at the end of the second year?
a. $102,600.
b. $104,400.
c. $108,600.
d. $109,200.