1. Explanation Partnership: It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio. The income statement for 2016 of L and Y is as follows: L and Y Income Statement For the Year Ended December 31, 2016 Professional fees $395,300 Operating expenses: Salary expense $154,500 Depreciation expense—building $15,700 Property tax expense $12,000 Heating and lighting expense $8,500 Supplies expense $6,000 Depreciation expense—office equipment $5,000 Miscellaneous expense $3,600 Total operating expenses $205,300 Net income $190,000 Table (1) Hence, the net income of L and Y for the year 2016 is $190,000. Division of net income: The following table shows the division of net income between the partners. L Y Total Salary allowance $45,000 $54,700 $99,700 Interest allowance $13,500 (1) $7,800 (2) $21,300 Remaining income (1:1) $34,500 $34,500 $69,000 Net income $93,000 $97,000 $190,000 Table (2) Working note for the calculation of Interest allowance of L and Y Interest Allowance of L (1): Interest Allowance of L } = ( 2. To determine Prepare the statement of partnership equity for 2016. 3. To determine Prepare the balance sheet at the end of 2016.

14th Edition

ISBN: 9781305088436

Author: Carl Warren, Jim Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Concept explainers

Partnership Accounting

A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm …

Partner Admission and Withdrawal

Question

Chapter 12, Problem 3PA

To determine

Prepare an income statement for 2016, indicating the division of the income.

To determine

Prepare the statement of partnership equity for 2016.

To determine

Prepare the balance sheet at the end of 2016.

Expert Solution & Answer

Chapter 12 Solutions

Financial Accounting

Ch. 12 - Prob. 1DQ Ch. 12 - Prob. 2DQ Ch. 12 - Prob. 3DQ Ch. 12 - Prob. 4DQ Ch. 12 - Prob. 5DQ Ch. 12 - Prob. 6DQ Ch. 12 - Prob. 7DQ Ch. 12 - Prob. 8DQ Ch. 12 - Prob. 9DQ Ch. 12 - Prob. 10DQ

Ch. 12 - Prob. 1PEA Ch. 12 - Prob. 1PEB Ch. 12 - Prob. 2PEA Ch. 12 - Prob. 2PEB Ch. 12 - Prob. 3PEA Ch. 12 - Prob. 3PEB Ch. 12 - Prob. 4PEA Ch. 12 - Prob. 4PEB Ch. 12 - Prior to liquidating their partnership, Parker and...Ch. 12 - Liquidating partnerships Prior to liquidating...Ch. 12 - Prob. 6PEA Ch. 12 - Prob. 6PEB Ch. 12 - Prob. 7PEA Ch. 12 - Eclipse Architects earned 1,800,000 during 2016...Ch. 12 - Prob. 1E Ch. 12 - Prob. 2E Ch. 12 - Prob. 3E Ch. 12 - Prob. 4E Ch. 12 - Prob. 5E Ch. 12 - Prob. 6E Ch. 12 - Prob. 7E Ch. 12 - Marvel Media, LLC, has three members: WLKT...Ch. 12 - Prob. 9E Ch. 12 - Prob. 10E Ch. 12 - Prob. 11E Ch. 12 - Prob. 12E Ch. 12 - Prob. 13E Ch. 12 - Prob. 14E Ch. 12 - Prob. 15E Ch. 12 - Prob. 16E Ch. 12 - Prob. 17E Ch. 12 - The statement of members equity for Bonanza, LLC,...Ch. 12 - Distribution of cash upon liquidation Hewitt and...Ch. 12 - Distribution of cash upon liquidation David Oliver...Ch. 12 - Liquidating partnershipscapital deficiency Lewis,...Ch. 12 - Prob. 22E Ch. 12 - Prob. 23E Ch. 12 - Statement of partnership liquidation After closing...Ch. 12 - Prob. 25E Ch. 12 - Prob. 26E Ch. 12 - The accounting firm of Deloitte Touche is the...Ch. 12 - Prob. 28E Ch. 12 - Prob. 1PA Ch. 12 - Prob. 2PA Ch. 12 - Prob. 3PA Ch. 12 - Prob. 4PA Ch. 12 - Statement of partnership liquidation After the...Ch. 12 - Prob. 6PA Ch. 12 - Prob. 1PB Ch. 12 - Prob. 2PB Ch. 12 - Prob. 3PB Ch. 12 - Prob. 4PB Ch. 12 - Statement of partnership liquidation After the...Ch. 12 - On August 3, the firm of Chapelle, Rock, and Pryor...Ch. 12 - Prob. 1CP Ch. 12 - Prob. 2CP Ch. 12 - Prob. 3CP Ch. 12 - Prob. 4CP

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On February 3, 2016 Sam Singh invested $90,000 cash for a 1/3 interest in a newly formed partnership. Prepare the journal entry to record the transaction.

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