Keith Williams and Brian Adams were students when they formed a partnership several years ago for a part-time business called Music Works. Adjusted trial balance information for the year ended December 31, 2023, appears below. Account Balance* Account Balance* Accounts payable S 9,500 Keith Williams, capital** $ 28, 300 Accumulated depreciation 75,000 Keith Williams, withdrawals 50,000 Brian Adams, capital** 22,000 Note payable, due May 2025*** 120,000 Brian Adams, withdrawals 60,000 Office supplies 16,000 Cash 208,000 Revenues 480,000 Equipment 300,000 Utilities payable 1, 200 Expenses 102,000 *Assume all account balances are normal. ** The partners made no investments during the year. ***$40,000 of the note payable is due in May 2024. Required: 1. Prepare calculations that show how the profit should be allocated to the partners assuming the partnership agreement states that profit/(losses) are to be shared by allowing a $90,000 per year salary allowance to Williams, a $150,000 per year salary allowance to Adams, and the remainder on a 3:2 ratio. (Leave no cell blank. Enter "0" when the answer is zero. ) 2. Prepare the journal entry to close the Income Summary account to the partners' capital accounts. 3. Prepare a statement of changes in equity and a classified balance sheet.
Keith Williams and Brian Adams were students when they formed a partnership several years ago for a part-time business called Music Works. Adjusted trial balance information for the year ended December 31, 2023, appears below. Account Balance* Account Balance* Accounts payable S 9,500 Keith Williams, capital** $ 28, 300 Accumulated depreciation 75,000 Keith Williams, withdrawals 50,000 Brian Adams, capital** 22,000 Note payable, due May 2025*** 120,000 Brian Adams, withdrawals 60,000 Office supplies 16,000 Cash 208,000 Revenues 480,000 Equipment 300,000 Utilities payable 1, 200 Expenses 102,000 *Assume all account balances are normal. ** The partners made no investments during the year. ***$40,000 of the note payable is due in May 2024. Required: 1. Prepare calculations that show how the profit should be allocated to the partners assuming the partnership agreement states that profit/(losses) are to be shared by allowing a $90,000 per year salary allowance to Williams, a $150,000 per year salary allowance to Adams, and the remainder on a 3:2 ratio. (Leave no cell blank. Enter "0" when the answer is zero. ) 2. Prepare the journal entry to close the Income Summary account to the partners' capital accounts. 3. Prepare a statement of changes in equity and a classified balance sheet.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Keith Williams and Brian Adams were students when they formed a partnership several years ago
for a part-time business called Music Works. Adjusted trial balance information for the year ended
December 31, 2023, appears below. Account Balance* Account Balance* Accounts payable $
9,500 Keith Williams, capital** $ 28, 300 Accumulated depreciation 75,000 Keith Williams,
withdrawals 50,000 Brian Adams, capital** 22,000 Note payable, due May 2025*** 120,000 Brian
Adams, withdrawals 60,000 Office supplies 16,000 Cash 208,000 Revenues 480,000 Equipment
300,000 Utilities payable 1, 200 Expenses 102,000 *Assume all account balances are normal. **
The partners made no investments during the year. ***$40,000 of the note payable is due in May
2024. Required: 1. Prepare calculations that show how the profit should be allocated to the
partners assuming the partnership agreement states that profit/(losses) are to be shared by
allowing a $90,000 per year salary allowance to Williams, a $150,000 per year salary allowance to
Adams, and the remainder on a 3:2 ratio. (Leave no cell blank. Enter "0" when the answer is zero.
) 2. Prepare the journal entry to close the Income Summary account to the partners' capital
accounts. 3. Prepare a statement of changes in equity and a classified balance sheet.
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