Financial Statements for Partnerships The ledger of Camila Ramirez and Ping Xue,

Question

Financial Statements for Partnerships

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:

The balance in Xue's capital account includes an additional investment of $20,000 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 $50,000 to Ramirez and $65,000 to Xue, allowances of 12% on each partner's capital balance at the beginning of the fiscal year, and equal division of the remaining net income or net loss.

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

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

Ramirez and Xue
Trial Balance
December 31, 20Y2 Debit Balances Credit Balances Cash 70,300 Accounts Receivable 33,600 Supplies 5,800 Land 128,000 Building 175,000 Accumulated Depreciation—Building 80,000 Office Equipment 42,000 Accumulated Depreciation—Office Equipment 25,300 Accounts Payable 12,400 Salaries Payable 10,000 Camila Ramirez, Capital 125,000 Camila Ramirez, Drawing 35,000 Ping Xue, Capital 155,000 Ping Xue, Drawing 50,000 Professional Fees 555,300 Salary Expense 384,900 Depreciation Expense—Building 12,900 Heating and Lighting Expense 10,500 Depreciation Expense—Office Equipment 6,300 Property Tax Expense 3,200 Supplies Expense 3,000 Miscellaneous Expense 2,500 963,000 963,000

Explanation / Answer

1.

Interest allowance:

Camila Ramirez: $125000 x 12% = $15000

Ping Xue: ($155000 - $20000) x 12% = $135000 x 12% = $16200

2.

3.

Ramirez and Xue Income Statement For the Year Ended December 31, 20Y2 Professional fees 555300 Operating expenses: Salary expense 384900 Heating and lighting expense 10500 Depreciation expense-building 12900 Depreciation expense-office equipment 6300 Property tax expense 3200 Supplies expense 3000 Miscellaneous expense 2500 Total operating expenses 423300 Net operating income 132000

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