Question

Keith Williams and Brian Adams were students when they formed a partnership several years ago for a part-time business called Music Works. Adjusted trial balance information for the year ended December 31, 2014, appears below.
Account...................Balance*
Accounts payable .................................................... $9,500
Accumulated depreciation....................................... 75,000
Brian Adams, capital** ............................................. 22,000
Brian Adams, withdrawals ....................................... 60,000
Cash....................................................................... 208,000
Equipment.............................................................. 300,000
Expenses................................................................. 102,000
Keith Williams, capital**......................................... $28,300
Keith Williams, withdrawals .................................... 50,000
Note payable, due May 2016***............................. 120,000
Office supplies........................................................ 16,000
Revenues ................................................................ 480,000
Utilities payable ...................................................... 1,200

Required
1. Prepare calculations that show how the income should be allocated to the partners assuming the partnership agreement states that incomes/losses are to be shared by allowing a $90,000 per year salary allowance to Williams, a $150,000 per year salary allowance to Adams, and the remainder on a 3:2 ratio.
2. Prepare the journal entry to close the Income Summary account to the partners’ capital accounts.
3. Prepare a statement of changes in equity and a classified balance sheet.
Analysis Component: Why might the partners’ capital accounts be so small relative to the amount of the withdrawals made?



$1.99
Sales0
Views55
Comments0
  • CreatedJanuary 08, 2015
  • Files Included
Post your question
5000