
Concept explainers
1.
It is that form of organization which is owned and managed by two or more persons who invest and share the
To prepare: An income statement for 20Y2, indicating the division of the income.
1.

Explanation of Solution
The income statement for 20Y2 of R&X is as follows:
R&X | ||
Income Statement | ||
For the Year Ended December 31, 20Y2 | ||
Professional fees | $555,300 | |
Operating expenses: | ||
Salary expense | $384,900 | |
| $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 | |
Total operating expenses | $423,300 | |
Net income | $132,000 |
Table (1)
Hence, the net income of R&X for the year 20Y2 is $132,000.
Division of net income:
The following table shows the division of net income between the partners.
R | X | Total | |
Salary allowance………………… | $50,000 | $65,000 | $115,000 |
Interest allowance…………… |
15,000 (1) |
16,200 (2) | $31,200 |
Remaining income (loss) (1:1)………… | -$7,100 | -$7,100 | -$14,200 |
Net income…………… | $57,900 | $74,100 | $132,000 |
Table (2)
Working note for the calculation of Interest allowance of R & X
Interest Allowance is at 12%:
(1)
(2)
Note: X invested additional $20000 on May 5, 20Y2, so, it should not be considered for calculating Interest allowance. So X’s Capital at the beginning of the year is $135,000
Hence, R & X partners will get $57,000 and $74,100 respectively from the net income.
2.
To prepare: The statement of partnership equity for 20Y2.
2.

Explanation of Solution
Statement of partnership equity:
The statement of partnership equity contains the changes in the partners’ capital account over a period of time. The changes in capital accounts of partners may occur due to the addition of the capital, net income or withdrawals.
The statement of partnership equity for 20Y2 is as follows:
R&X | |||
Statement of Partnership Equity | |||
For the Year Ended December 31, 20Y2 | |||
R | X | Total | |
Balances, January 1, 20Y2 | $125,000 | $135,000 | $260,000 |
Capital additions | $20,000 | $20,000 | |
Net income for the year | $57,900 | $74,100 | $132,000 |
Partner withdrawals | -$35,000 | -$50,000 | -$85,000 |
Balances, December 31, 20Y2 | $147,900 | $179,100 | $327,000 |
Table (3)
Hence, the capital accounts of R & X partners show $147,900 and $179,000 respectively at the end of the period.
3.
To prepare: The
3.

Explanation of Solution
The balance sheet of R & X at the end of 20Y2 is as follows:
R&X | |||
Balance Sheet | |||
December 31, 20Y2 | |||
Assets | |||
Current assets: | |||
Cash | $70,300 | ||
| $33,600 | ||
Supplies | $5,800 | ||
Total current assets | $109,700 | ||
Property, plant, and equipment: | |||
Land | $128,000 | ||
Building | $175,000 | ||
Less | $80,000 | $95,000 | |
Office equipment | $42,000 | ||
Less accumulated depreciation | $25,300 | $16,700 | |
Total property, plant, and equip. | $239,700 | ||
Total assets | $349,400 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | $12,400 | ||
Salaries payable | $10,000 | ||
Total liabilities | $22,400 | ||
Partners’ Equity | |||
R, capital | $147,900 | ||
X, capital | $179,100 | ||
Total partners’ equity | $327,000 | ||
Total liabilities and partners’ equity | $349,400 |
Table (4)
Hence, the assets total matches with total liabilities and partners’ equity in the balance sheet, on the date of formation of partnership.
Want to see more full solutions like this?
Chapter 12 Solutions
CUSTOM PKG FOR AC114
- The incremental net income formarrow_forwardEliza had a commercial warehouse destroyed in a hurricane. The old warehouse was purchased for $310,000, and $94,000 of depreciation deductions had been taken. Eliza received insurance proceeds of $610,000. Although the new warehouse was larger and more modern than the old one, it qualified as replacement property. Eliza acquired the new property 11 months after the hurricane for $660,000. What is the amount of Eliza's realized gain, recognized gain, and the basis in the new property? Answerarrow_forwardMeadowlane Furnishings had a beginning inventory of $105,000, an ending inventory of $147,000, a cost of goods sold of $325,000, and a sales revenue of $510,000. What is Meadowlane’s days in inventory?arrow_forward
- Help me with thisarrow_forwardDetermine the accounts receivable average collection periodarrow_forwardLucid Echo Studios has forecasted sales of $24,000,000 for next year and expects its cost of goods sold (COGS) to remain at 75% of sales. Currently, the firm holds $2,700,000 in inventories, $1,800,000 in accounts receivable, and $2,200,000 in accounts payable. What is the length of Lucid Echo Studios' cash conversion cycle (CCC)? a. 40.94 days b. 31.58 days c. 37.53 days d. 43.75 daysarrow_forward
- Answer? Financial accounting questionarrow_forwardGerald Books Ltd. currently has $720,000 in accounts receivable and generated $5,600,000 in sales (all on credit) during the year that just ended. The firm's days sales outstanding (DSO) is how many days? Use 365 days as the length of a year in all calculations. Gerald Books Ltd.'s CFO is unhappy with its DSO and wants to improve collections next year. Sales are expected to grow by 10% next year, and the CFO wants to lower the DSO to the industry average of 28 days. How much accounts receivable is the firm expected to carry next year?arrow_forwardWing Apparel Store had a balance in the Accountsarrow_forward
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning


