E-Z Manufacturing Company is a partnership among Yolando Gonzales, Willie Todd, and Linda Yeager. The partnership contract states that partnership profits will be split equally among the three partners. During the current year Gonzales withdrew $25,000, Todd withdrew $23,000, and Yeager withdrew $30,000. Net income of E-Z Manufacturing Company amounted to $180,000.
a. Calculate each partner’s share of net income for the period.
b. Describe the effects, if any, that partnership operations would have on the individual tax returns of the partners.
c. Prepare a statement of partners’ equity for the year. Assume that partners’ capital accounts had beginning balances of $50,000, $60,000, and $40,000 for Gonzales, Todd, and Yeager, respectively.