Question

Les Waruck, Kim Chau, and Leena Manta formed a partnership, WCL Sales, on January 11, 2014, by investing $68,250, $109,200, and $95,550, respectively. The partnership agreement states that incomes and losses are to be shared on the basis of a salary allowance of $40,000 for Waruck, $80,000 for Chau, and $40,000 for Manta, with any remainder shared on the ratio of beginning-of-period capital balance.
Following is the December 31, 2014, adjusted trial balance, in alphabetical order:
Account..................................................................... Balance*
Accounts payable .................................................... 14,000
Accounts receivable ................................................ 46,000
Accumulated amortization, patent.......................... 6,000
Accumulated depreciation, fixtures ......................... 3,000
Accumulated depreciation, furniture....................... 6,000
Allowance for doubtful accounts............................. 1,200
Amortization expense, patent ................................. 2,000
Bad debt expense ................................................... 2,800
Cash....................................................................... 14,000
Depreciation expense, fixtures................................ 3,000
Depreciation expense, furniture .............................. 6,000
Fixtures ................................................................... 31,000
Furniture................................................................. 69,000
Kim Chau, capital ...................................................109,200
Kim Chau, withdrawals ........................................... 14,000
Leena Manta, capital .............................................. 95,550
Leena Manta, withdrawals...................................... 10,000
Les Waruck, capital ................................................. 68,250
Les Waruck, withdrawals......................................... 30,000
Merchandise inventory ........................................... 22,000
Notes payable, due 2017** .................................... 34,000
Patent.................................................................... 20,000
Prepaid rent........................................................... 36,000
Rent expense .......................................................... 84,000
Sales....................................................................... 102,000
Sales discounts ....................................................... 3,400
Unearned sales ....................................................... 3,000
Wages expense....................................................... 49,000

Required
Prepare the December 31, 2014, classified balance sheet, showing all appropriate supporting calculations.
Analysis Component:
Assuming that the assets of businesses similar to WCL Sales are financed 60% by debt and 40% by equity, does WCL Sales compare favorably or unfavourably to the industry average? What is the relationship between type of financing and risk?



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  • CreatedJanuary 08, 2015
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