Barber's Ending Equity Calculation
What is Barber's ending equity?
Barber and Atkins are partners in an accounting firm. Barber's beginning partnership capital balance for the current year is $238,000, and Atkins's beginning partnership capital balance for the current year is $145,000. The partnership had a net income of $351,000 for the year. Barber withdrew $78,000 during the year and Atkins withdrew $40,000.
Barber's Ending Equity
Barber's ending equity is calculated by adding the beginning equity and Barber's share of the net income, then subtracting the amount Barber withdrew. The calculation is $238,000 + $175,500 - $78,000, which equals $335,500.
Barber's ending equity for the current year is $335,500. Begin with his initial capital balance, add his share of net income and then subtract his withdrawals.
The subject of this question relates to partnership and equity. Specifically, we are looking to calculate Barber's ending equity in the partnership. To do this, you must follow these steps:
- Start with Barber's beginning partnership capital balance which is $238,000.
- Add in Barber's share of the net income for the year. Since it doesn't mention how the net income is divided, we'll assume it's split evenly. So the net income of $351,000 divided by 2 equates to $175,500 that will be allocated to Barber.
- Subtract Barber's withdrawals for the year, which total $78,000.
After these steps, you should then compute his ending equity.
$238,000 (beginning balance) + $175,500 (half of net income) - $78,000 (withdrawals) = $335,500, which is Barber's ending equity.