Question

With the following information (below), I need help preparing year-end adjusting entries (step 1), completing the partnership profit/losses allocation chart + subsequent adjusting journal entry (step 2), posting adjusting entries and completing the trial balance sheet (step 3), and preparing an income statement, statement of partners' capital and balance sheet (step 4).

Partnership A, B, and C is a law firm. You have been engaged as accountant to prepare financial statements for the year ended December 31, 2019.

On the partnership's trial balance, "Salary expenses" are each partners' withdrawals for the year.

Partnership profits are allocated based first on salaries, then on interest on opening capital balances, then on a fixed ratio.

Salary allocation amounts:

A: $100,000
B: $100,000
C: $160,000

Opening capital balances are:

A: $70,000
B: $60,000
C: $70,000

Interest rate: 5%

The fixed ratio:

A: 2
B: 3
C: 5

Requirements with templates:                             

Step 1: Prepare year-end adjusting entries. No descriptions are necessary.                                   

A, B, and C GENERAL JOURNAL Description Debit Credit

Step 2: Allocate partnership profit or loss to each partner, then prepare the necessary adjusting entry.

Step 3: Post the adjusting entries and complete the trial balance.

Step 4: Prepare an income statement and statement of partners' capital for the year ended December 31, 2019 and a balance sheet at December 31.

Answer 1

Year end Adjustment entries of A, B and C
S. No	Particulars	Note No	Debit/(Credit)
1	Salaries A/c Dr	1	$    360,000.00
	To A Capital A/c Cr		$ (100,000.00)
	To B Capital A/c Cr		$ (100,000.00)
	To C Capital A/c Cr		$ (160,000.00)
2	Interest on Op Cap A/c Dr	2	$     10,000.00
	To A Capital A/c Cr		$      (3,500.00)
	To B Capital A/c Cr		$      (3,000.00)
	To C Capital A/c Cr		$      (3,500.00)
3	A Capital A/c Dr	3	$     44,000.00
	B Capital A/c Dr		$     66,000.00
	C Capital A/c Dr		$    110,000.00
	To Loss of Share		$ (220,000.00)
4	A Drawings A/c Dr		$    110,000.00
	B Drawings A/c Dr		$    100,000.00
	C Drawings A/c Dr		$    160,000.00
	To Salary -A		$ (110,000.00)
	To Salary -B		$ (100,000.00)
	To Salary -C		$ (160,000.00)

Adjusted Trail Balance
	Unadjusted Balance		#	Adjusting Entries		#	Adjusted Balance
Account Title	Debit	Credit		Debit	Credit		Debit	Credit
Cash	$     70,000.00						$         70,000.00
Accounts Receivable	$   300,000.00						$       300,000.00
Accounts Payable		$     70,000.00						$             70,000.00
A, Capital		$   190,000.00			$ 103,500.00			$           293,500.00
A, Withdrawals				$ 110,000.00			$       110,000.00
B, Capital		$   180,000.00			$ 103,000.00			$           283,000.00
B, Withdrawals				$ 100,000.00			$       100,000.00
C, Capital		$   150,000.00			$ 163,500.00			$           313,500.00
C, Withdrawals				$ 160,000.00			$       160,000.00
Income Summary
Fees Revenue		$   550,000.00						$           550,000.00
Office Expense	$   400,000.00						$       400,000.00
Salaries Expense - A	$   110,000.00			$ 100,000.00	$ 110,000.00		$       100,000.00
Salaries Expense - B	$   100,000.00			$ 100,000.00	$ 100,000.00		$       100,000.00
Salaries Expense - C	$   160,000.00			$ 160,000.00	$ 160,000.00		$       160,000.00
Interest on Opening Cap-A				$    3,500.00			$           3,500.00
Interest on Opening Cap-B				$    3,000.00			$           3,000.00
Interest on Opening Cap-C				$    3,500.00			$           3,500.00
	$ 1,140,000.00	$ 1,140,000.00		$ 740,000.00	$ 740,000.00		$     1,510,000.00	$        1,510,000.00

A,B and C
Income statement
For the Year Ended December 31, 2019
Fee Revenue	550,000.00
less Office expenses	(400,000.00)
Gross Income	150,000.00

Statement of Allocation of Profits to A, B and C
	A	B	C	Total
Opening Cap	$    70,000.00	$                   60,000.00	$    70,000.00
Fixed ratio	2.00	3.00	5.00	10.00
Gross Income				150,000.00
Salary	$     100,000.00	$                    100,000.00	$     160,000.00	$         (360,000.00)
Interest on Op Cap	$        3,500.00	$                       3,000.00	$        3,500.00	$          (10,000.00)
Net Loss				(220,000.00)
Share of Losses	(44,000.00)	(66,000.00)	(110,000.00)	220,000.00
				-

Statement of Partners Capital A/c
	A	B	C
Balance as on Jan 01, 2019	$       70,000.00	$                     60,000.00	$      70,000.00
Additional Capital	$     120,000.00	$                    120,000.00	$      80,000.00
Less Drawings	$   (110,000.00)	$                  (100,000.00)	$   (160,000.00)
Add: Salaries	$     100,000.00	$                    100,000.00	$     160,000.00
Add: Interest on Op Cap	$        3,500.00	$                       3,000.00	$        3,500.00
Less: Share of Losses	$     (44,000.00)	$                    (66,000.00)	$   (110,000.00)
Balance as on Dec 31, 2018	$ 139,500.00	$                 117,000.00	$    43,500.00
Total Capital A/c			$ 300,000.00

A, B and C
Balance sheet as at Dec 31, 2018
Assets		Liabilities
Cash	$       70,000.00	Capital A/c	$     300,000.00
Accounts Receivable	$     300,000.00	Accounts Payable	$      70,000.00
Total Assets	$ 370,000.00	Total Liabilities	$ 370,000.00