Question description
Bertram and Ernest share profits and losses equally after salary and interest
allowances. Bertram and Ernest receive salary allowances of $40,000 and $60,000,
respectively, and both partners receive 10% interest on their average capital
balances. Average capital balances are calculated at the beginning of each
month, regardless of when additional capital contributions or permanent
withdrawals are made subsequently within the month. Partners’ drawings of $3,000
per month are not used in determining the average capital balances. Total net
income for 2011 is $240,000.
BertramErnest
January 1 capital balances$200,000$240,000
Yearly drawings ($3,000 a month)(36,000)(36,000)
Permanent withdrawals of capital:
June 3(24,000)
May 2(30,000)
Additional investments of capital:
July 380,000
October 2100,000
What is the weighted-average capital for Bertram and Ernest in 2011?
A) $224,000 and $245,000
B) $203,333 and $221,167
C) $221,333 and $239,167
D) $256,000 and $220,000
