Keith Williams and Brian Adams were students when they formed a partnership several years ago for a parttime business called Music Works. Adjusted trial balance information for the year ended December 31, 2020, appears below.

Required

1. Prepare calculations that show how the profit should be allocated to the partners assuming the partnership agreement states that profit/(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?

Transcribed Image Text:

Account Accounts payable Accumulated depreciation. Brian Adams, capital". Brian Adams, withdrawals Cash. Balance" Account Keith Williams, capital". Keith Williams, withdrawals. Note payable, due May 2022*. Office supplies. Revenues. Utilities payable. Balance* $ 9,500 $ 28,300 50,000 120,000 75,000 22,000 16,000 480,000 1,200 208,000 Equipment. Expenses. 300,000 102,000