Question

Financial Statements for Partnership

The ledger of Camila Ramirez and Ping Xue, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y2:

Ramirez and Xue
Trial Balance
December 31, 20Y2
	Debit Balances		Credit Balances
Cash	42,000
Accounts Receivable	40,000
Supplies	1,500
Land	100,000
Building	109,000
Accumulated Depreciation—Building			62,500
Office Equipment	46,000
Accumulated Depreciation—Office Equipment			19,400
Accounts Payable			29,800
Salaries Payable			3,200
Camila Ramirez, Capital			100,000
Camila Ramirez, Drawing	45,000
Ping Xue, Capital			60,000
Ping Xue, Drawing	65,000
Professional Fees			363,100
Salary Expense	146,000
Depreciation Expense—Building	14,500
Property Tax Expense	9,000
Heating and Lighting Expense	7,200
Supplies Expense	5,200
Depreciation Expense—Office Equipment	4,500
Miscellaneous Expense	3,100
	638,000		638,000

The balance in Xue' capital account includes an additional investment of $10,000 made on May 5, 20Y2.

Required:

1. Prepare an income statement for 20Y2, indicating the division of net income. The partnership agreement provides for salary allowances of $40,000 to Ramirez and $49,000 to Xue, allowances of 10% on each partner's capital balance at the beginning of the fiscal year, and equal division of the remaining net income or net loss.

Ramirez and Xue Income Statement For the Year Ended December 31, 20Y2
Professional Fees
Operating expenses:
Total operating expenses
		$

Ramirez and Xue Division of Income For the Year Ended December 31, 20Y2
	Camila Ramirez	Ping Xue	Total
Division of net income:
Salary allowance
Interest allowance
Remaining income
Net income

2. Prepare a statement of partnership equity for 20Y2. If any amounts are zero, enter in "0".

Ramirez and Xue Statement of Partnership Equity For the Year Ended December 31, 20Y2
	Camila Ramirez	Ping Xue	Total
Balances, January 1, 20Y2
Capital additions
Net income for the year
Partner withdrawals
Balances, December 31, 20Y2	$	$	$

3. Prepare a balance sheet as of the end of 20Y2.

Ramirez and Xue Balance Sheet December 31, 20Y2
Assets
Current assets:
Total current assets			$
Property, plant, and equipment:
Total property, plant, and equip.
Total assets			$
Liabilities
Current liabilities:
Total liabilities
Partners' Equity
Total partners' equity
Total liabilities and partners' equity			$

Answer 1

Ramirez and Xue
Income Statement
For the Year Ended December 31, 20Y2
Professional Fees		363100
Operating expenses:
Salary Expense	146000
Depreciation Expense—Building	14500
Property Tax Expense	9000
Heating and Lighting Expense	7200
Supplies Expense	5200
Depreciation Expense—Office Equipment	4500
Miscellaneous Expense	3100
Total operating expenses		189500
Net income		173600
Ramirez and Xue
Division of Income
For the Year Ended December 31, 20Y2
	Camila Ramirez	Ping Xue	Total
Division of net income:
Salary allowance	40000	49000	89000
Interest allowance	10000	5000	15000
Remaining income	34800	34800	69600
Net income	84800	88800	173600
2
Ramirez and Xue
Statement of Partnership Equity
For the Year Ended December 31, 20Y2
	Camila Ramirez	Ping Xue	Total
Balances, January 1, 20Y2	100000	50000	150000
Capital additions	0	10000	10000
Net income for the year	84800	88800	173600
Partner withdrawals	(45000)	(65000)	(110000)
Balances, December 31, 20Y2	139800	83800	223600
3
Ramirez and Xue
Balance Sheet
December 31, 20Y2
Assets
Current assets:
Cash		42000
Accounts Receivable		40000
Supplies		1500
Total current assets			83500
Property, plant, and equipment:
Land		100000
Building	109000
Accumulated Depreciation—Building	62500	46500
Office Equipment	46000
Accumulated Depreciation—Office Equipment	19400	26600
Total property, plant, and equip.			173100
Total assets			256600
Liabilities
Current liabilities:
Accounts Payable		29800
Salaries Payable		3200
Total liabilities			33000
Partners' Equity
Camila Ramirez, Capital		139800
Ping Xue, Capital		83800
Total partners' equity			223600
Total liabilities and partners' equity			256600