The partnership of Rummel and Kang, Stonecutters, reported revenues of $133,000 and expenses of $41,000 on the year-end work sheet. The capital balances as of January 1, 20--, were $41,000 for C. Rummel and $25,000 for V. Kang. No additional investments were made during the year. As stated in their partnership agreement, after withdrawing salary allowances of $43,000 for Rummel and $34,000 for Kang, the partners each withdrew their full 10% interest allowances on their January 1 capital balances. No additional withdrawals were made. Any remaining net income is to be divided on a 60-40 basis. Required: 1. Prepare the lower portion of the income statement of the partnership for the year ended December 31, 20--, showing the division of the partnership net income for the year. 2. Prepare a statement of partners’ equity for the year ended December 31, 20--, and the partners’ equity section of the balance sheet on that date. 3. Prepare closing entries for the partnership as of December 31, 20--. (For simplicity, use the account titles “Revenues” for all revenues and “Expenses” for all expenses.)
The partnership of Rummel and Kang, Stonecutters, reported revenues of $133,000 and expenses of $41,000 on the year-end work sheet. The capital balances as of January 1, 20--, were $41,000 for C. Rummel and $25,000 for V. Kang. No additional investments were made during the year. As stated in their partnership agreement, after withdrawing salary allowances of $43,000 for Rummel and $34,000 for Kang, the partners each withdrew their full 10% interest allowances on their January 1 capital balances. No additional withdrawals were made. Any remaining net income is to be divided on a 60-40 basis. Required: 1. Prepare the lower portion of the income statement of the partnership for the year ended December 31, 20--, showing the division of the partnership net income for the year. 2. Prepare a statement of partners’ equity for the year ended December 31, 20--, and the partners’ equity section of the balance sheet on that date. 3. Prepare closing entries for the partnership as of December 31, 20--. (For simplicity, use the account titles “Revenues” for all revenues and “Expenses” for all expenses.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
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 is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
The partnership of Rummel and Kang, Stonecutters, reported revenues of $133,000 and expenses of $41,000 on the year-end work sheet. The capital balances as of January 1, 20--, were $41,000 for C. Rummel and $25,000 for V. Kang. No additional investments were made during the year. As stated in their partnership agreement, after withdrawing salary allowances of $43,000 for Rummel and $34,000 for Kang, the partners each withdrew their full 10% interest allowances on their January 1 capital balances. No additional withdrawals were made. Any remaining net income is to be divided on a 60-40 basis.
Required:
| 1. | Prepare the lower portion of the income statement of the partnership for the year ended December 31, 20--, showing the division of the partnership net income for the year. |
| 2. | Prepare a statement of partners’ equity for the year ended December 31, 20--, and the partners’ equity section of the |
| 3. | Prepare closing entries for the partnership as of December 31, 20--. (For simplicity, use the account titles “Revenues” for all revenues and “Expenses” for all expenses.) |
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