On March 2, 2016, Zoe Moreau, Karen Krneta, and Veronica Visentin start a partnership to operate a

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On March 2, 2016, Zoe Moreau, Karen Krneta, and Veronica Visentin start a partnership to operate a personal coaching and lifestyle consulting practice for professional women. Zoe will focus on work-life balance issues, Karen on matters of style, and Veronica on health and fitness. They sign a partnership agreement to split profits in a 3:2:3 ratio for Zoe, Karen, and Veronica, respectively. The following are the transactions for MKV Personal Coaching:

2016

Mar. 2 The partners contribute assets to the partnership at the following agreed amounts:

On March 2, 2016, Zoe Moreau, Karen Krneta, and Veronica

They also agree that the partnership will assume responsibility for Karen's note payable of $5,000.
Dec. 20 Zoe, Karen, and Veronica each withdraw $30,000 cash as a "year-end bonus." No other withdrawals were made during the year.
31 Total profit for 2016 was $110,000.
2017
Jan. 5 Zoe and Veronica approve Karen's request to withdraw from the partnership for personal reasons. They agree to pay Karen $15,000 cash from the partnership.
6
Zoe and Veronica agree to change their profit-sharing ratio to 4:5, respectively.
Dec. 20 Zoe and Veronica withdraw $42,750 and $45,000 cash, respectively, from the partnership.
31
Total profit for 2017 was $123,750.
Zoe and Veronica agree to admit Dela Hirjikaka to the partnership. Dela will focus on providing training in organizational skills to clients. Dela invests $31,000 cash for 25% ownership of the partnership.
Instructions
(a)
Record the above transactions. For the profit earned each year, calculate how it is to be allocated and record the closing of the Income Summary account.
(b) Prepare the partners' equity section of the balance sheet after Dela is admitted to the partnership.
TAKING
IT FURTHER
Every time a new partner is admitted to a partnership or a partner withdraws from a partnership, it is necessary to completely close the accounting records of the existing partnership and start new accounting records for the new partnership. Do you agree or disagree? Explain.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
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Accounting Principles

ISBN: 978-1119048473

7th Canadian Edition Volume 2

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

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