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:

1. Ramirez and Xue
   Trial Balance
   December 31, 20Y2
   	Debit Balances		Credit Balances
   Cash	38,200
   Accounts Receivable	36,400
   Supplies	1,400
   Land	91,000
   Building	100,000
   Accumulated Depreciation—Building			56,900
   Office Equipment	41,900
   Accumulated Depreciation—Office Equipment			17,700
   Accounts Payable			27,100
   Salaries Payable			2,900
   Camila Ramirez, Capital			90,000
   Camila Ramirez, Drawing	41,000
   Ping Xue, Capital			54,600
   Ping Xue, Drawing	59,200
   Professional Fees			332,400
   Salary Expense	132,900
   Depreciation Expense—Building	13,200
   Property Tax Expense	8,200
   Heating and Lighting Expense	6,600
   Supplies Expense	4,700
   Depreciation Expense—Office Equipment	4,100
   Miscellaneous Expense	2,800
   	581,600		581,600

   The balance in Xue' capital account includes an additional investment of $9,000 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 $37,000 to Ramirez and $45,000 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
   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

Part 1)

The income statement is prepared as below:

	RAMIREZ AND XUE
	Income Statement
	For the Year Ended December 31, 20Y2
Professional Fees		332,400
Operating Expenses:
Salary Expense	132,900
Depreciation Expense-Building	13,200
Heating and Lighting Expense	6,600
Depreciation Expense-Office Equipment	4,100
Property Tax Expense	8,200
Supplies Expense	4,700
Miscellaneous Expense	2,800
Total Operating Expenses		172,500
Net Income		$159,900

_____

	RAMIREZ AND XUE
	Division of Income
	For the Year Ended December 31, 20Y2
	Camila Ramirez	Ping Xue	Total
Division of Net Income:
Salary Allowance	37,000	45,000	82,000
Interest Allowance	9,000 [90,000*10%]	4,560 [(54,600-9,000)*10%]	13,560
Remaining Income (Loss) [(159,900-82,000-13,560)*1/2]	32,170	32,170	64,340
Net Income	$78,170	$81,730	$159,900

_____

Part 2)

The statement of partnership equity for 20Y2 is given as follows:

	RAMIREZ AND XUE
	Statement of Partnership Equity
	For the Year Ended December 31, 20Y2
	Camila Ramirez	Ping Xue	Total
Balances, January 1, 20Y2	90,000	45,600	135,600
Additional Investment during the Year	0	9,000	9,000
	90,000	54,600	144,600
Net Income for the Year	78,170	81,730	159,900
	168,170	136,330	304,500
Withdrawals during the Year	41,000	59,200	100,200
Balances, December 31, 20Y2	$127,170	$77,130	$204,300

_____

Part 3)

The balance sheet as of the end of 20Y2 is prepared as follows:

	RAMIREZ AND XUE
	Balance Sheet
	December 31, 20Y2
Assets:
Current Assets:
Cash		38,200
Accounts Receivable		36,400
Supplies		1,400
Total Current Assets			76,000
Property, Plant, and Equipment:
Land	91,000	91,000
Building	100,000
Less Accumulated Depreciation	56,900	43,100
Office Equipment	41,900
Less Accumulated Depreciation	17,700	24,200
Total Property, Plant, and Equip.			158,300
Total Assets			$234,300
Liabilities:
Current Liabilities:
Accounts Payable		27,100
Salaries Payable		2,900
Total Liabilities			30,000
Partner's Equity
Camila Ramirez, Capital		127,170
Ping Xue, Capital		77,130
Total Partner's Equity			204,300
Total Liabilities and Partner's Equity			$234,300