College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 19, Problem 7SPA
1.
To determine
Prepare the lower portion of income statement of the
1.
Expert Solution
Explanation of Solution
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement. In partnership, the division is often recorded in the lower portion of the income statement.
Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and
Prepare lower portion of income statement:
| Partnership R and B, CPAs | |||
| Income Statement (Partial) | |||
| For Year Ended December 31 | |||
| Net income | $135,000 | ||
| Allocation of net income: | Partner R | Partner B | Total |
| Salary allowances | $65,000 | $35,000 | $100,000 |
| Interest allowances | $5,500 | $4,500 | $10,000 |
| Remaining income | $11,250 | $13,750 | $25,000 |
| Allocation of net income | $81,750 | $53,250 | $135,000 |
Table (1)
2.
To determine
Prepare a statement of partners’ equity for the year ended December 31 and partners’ equity section of the balance sheet on that date.
2.
Expert Solution
Explanation of Solution
Statement of Partners’ equity: This statement reports the equity of each partner and summarizes the division of net income for the year.
Statement of partners ‘equity is prepared as follows:
| Partnership R and B, CPAs | |||
| Statement of Partners’ Equity | |||
| For Year Ended December 31 | |||
| Person R | Person B | Total | |
| Capital, January 1 | $55,000 | $45,000 | $100,000 |
| Net income for the year | $81,750 | $53,250 | $135,000 |
| $136,750 | $98,250 | $235,000 | |
| Withdrawals (salary & interest) | $70,500 | $39,500 | $110,000 |
| Capital, December 31 | $66,250 | $58,750 | $125,000 |
Table (2)
Prepare partners’ equity section of the balance sheet on that date:
| Partnership R and B, CPAs | ||
| Balance Sheet (Partial) | ||
| December 31 | ||
| Partners’ Equity | ||
| Partner R, Capital | $66,250 | |
| Partner B, Capital | $58,750 | |
| Total partners’ equity | $125,000 | |
Table (3)
3.
To determine
Prepare closing entries for the partnership as of December 31.
3.
Expert Solution
Explanation of Solution
Closing entries:
Closing entries are those
Prepare closing entries:
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Revenues | $215,000 | |
| Income Summary | $215,000 | ||
| ( To close all revenues to income summary) |
Table (4)
- Revenue is a component of partners’ equity and it is decreased. Therefore, debit revenue account by $215,000.
- Income summary is a component of partners’ equity and it is increased. Therefore, credit income summary account by $215,000.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Income Summary | $80,000 | |
| Expenses | $80,000 | ||
| ( To close all expenses to income summary) |
Table (5)
- Income summary is a component of partners’ equity and it is decreased. Therefore, debit income summary account by $80,000.
- Revenue is a component of partners’ equity and it is increased. Therefore, credit revenue account by $80,000.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Income Summary | $135,000 | |
| Partner R, Capital | $81,750 | ||
| Partner S, Capital | $53,250 | ||
| ( To close income summary by allocating each partners’ share of net income or net loss to the individual capital account) |
Table (6)
- Income summary is a component of partners’ equity and it is decreased. Therefore, debit income summary account by $135,000.
- Partner R, Capital is a component of partners’ equity and it is increased. Therefore, credit Partner R, Capital account by $81,750.
- Partner S, Capital is a component of partners’ equity and it is increased. Therefore, credit Partner S, Capital account by $53,250.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Partner R, Capital | $70,500 | |
| Partner R, Drawing | $70,500 | ||
| ( To close each partners’ drawing account to the individual capital accounts) |
Table (7)
- Partner R, Capital is a component of partners’ equity and it is decreased. Therefore, debit Partner R, Capital account by $70,500.
- Partner R, Drawing is a component of partners’ equity and it is increased. Therefore, credit Partner R, Drawing account by $70,500.
| Date | Account titles and Explanation | Debit | Credit |
| December 31 | Partner B, Capital | $39,500 | |
| Partner B, Drawing | $39,500 | ||
| ( To close each partners’ drawing account to the individual capital accounts) |
Table (8)
- Partner B, Capital is a component of partners’ equity and it is decreased. Therefore, debit Partner B, Capital account by $39,500.
- Partner B, Drawing is a component of partners’ equity and it is increased. Therefore, credit Partner B, Drawing account by $39,500.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Preparing Partial Financial Statements and Closing Entries
The partnership of Robo and Swing, CPAS, reported revenues of $215,000 and expenses of $80,000 on their year-end work sheet. Their capital balances as of January 1, 20--,
were $55,000 for I. Robo and $45,000 for B. Swing. No additional investments were made during the year. As stated in their partnership agreement, after withdrawing salary
allowances of $65,000 for Robo and $35,000 for Swing, 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 45-55 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.
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…
QUESTION:
SHARP AND TOWNSON HAD CAPITAL BALANCES OF $60,000
AND $120,000, RESPECTIVELY ON JANUARY 1 OF THE
CURRENT YEAR.
ON MAY 8, SHARP INVESTED AN ADDITIONAL $10,000 IN THE
PARTNERSHIP.
DURING THE YEAR, SHARP AND TOWNSON WITHDREW
$25,000 AND $45,000, RESPECTIVELY.
AFTER CLOSING ALL EXPENSE AND REVENUE ACCOUNTS AT
THE END OF THE YEAR, INCOME SUMMARY HAS A CREDIT
BALANCE OF $90,000 THAT SHARP AND TOWNSON HAVE
AGREED TO SPLIT ON A 2:1 BASIS, RESPECTIVELY.
JOURNALIZE THE ENTRIES TO CLOSE THE INCOME SUMMARY
ACCOUNT AND THE DRAWING ACCOUNTS.
Chapter 19 Solutions
College Accounting, Chapters 1-27
Ch. 19 - Prob. 1TFCh. 19 - Prob. 2TFCh. 19 - Prob. 3TFCh. 19 - Prob. 4TFCh. 19 - Prob. 5TFCh. 19 - Prob. 1MCCh. 19 - Prob. 2MCCh. 19 - Prob. 3MCCh. 19 - Prob. 4MCCh. 19 - Prob. 5MC
Ch. 19 - Prob. 1CECh. 19 - Prob. 2CECh. 19 - Prob. 3CECh. 19 - Prob. 4CECh. 19 - Prob. 5CECh. 19 - Prob. 1RQCh. 19 - Prob. 2RQCh. 19 - Prob. 3RQCh. 19 - Prob. 4RQCh. 19 - Prob. 5RQCh. 19 - Prob. 6RQCh. 19 - Prob. 7RQCh. 19 - Prob. 8RQCh. 19 - Prob. 9RQCh. 19 - Prob. 1SEACh. 19 - Prob. 2SEACh. 19 - Prob. 3SEACh. 19 - Prob. 4SEACh. 19 - ENTRIES: PARTNERSHIP LIQUIDATION On liquidation of...Ch. 19 - Prob. 6SPACh. 19 - Prob. 7SPACh. 19 - Prob. 8SPACh. 19 - Prob. 9SPACh. 19 - STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS...Ch. 19 - Prob. 1SEBCh. 19 - Prob. 2SEBCh. 19 - Prob. 3SEBCh. 19 - Prob. 4SEBCh. 19 - Prob. 5SEBCh. 19 - Prob. 6SPBCh. 19 - Prob. 7SPBCh. 19 - ENTRIES FOR DISSOLUTION OF PARTNERSHIP Cummings...Ch. 19 - Prob. 9SPBCh. 19 - STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS...Ch. 19 - Prob. 1MYWCh. 19 - Prob. 1ECCh. 19 - Prob. 1MPCh. 19 - Prob. 1CPCh. 19 - Prob. 1COP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The ledger of Tyler Lambert and Jayla Yost, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y3: Lambert and Yost Trial Balance December 31, 20Y3 Debit Balances Credit Balances Cash 34,000 Accounts Receivable 47,800 Supplies 2,000 Land 120,000 Building Accumulated Depreciation-Building Office Equipment Accumulated Depreciation-Office Equipment Accounts Payable Salaries Payable Tyler Lambert, Capital Tyler Lambert, Drawing Jayla Yost, Capital Jayla Yost, Drawing 157,500 67,200 63,600 21,700 27,900 5,100 135,000 50,000 88,000 60,000 Professional Fees 395,300 Salary Expense Depreciation Expense-Building 154,500 15,700 Property Tax Expense 12,000 Heating and Lighting Expense Supplies Expense Depreciation Expense-Office Equipment Miscellaneous Expense 8,500 6,000 5,000 3,600 740,200 740,200 The balance in Yost's capital account includes an additional investment of $10,000 made on April 10, 2OY3. (Continued)arrow_forwardEntries for Allocation of Net Income Danny Spurlock and Tracy Wilson decided to form a partnership on July 1, 20-1. Spurlock invested $80,000 and Wilson invested $20,000. For the fiscal year ended June 30, 20-2, a net income of $81,000 was earned. Determine the amount of net income that Spurlock and Wilson would receive under each of the following independent assumptions: Spurlock Wilson 1. There is no agreement concerning the distribution of net income. 2. Each partner is to receive 10% interest on their original investment. The remaining net income is to be divided equally. 3. Spurlock and Wilson are to receive a salary allowance of $35,000 and $26,000, respectively. The remaining net income is to be divided equally. 4. Each partner is to receive 10% interest on their original investment. Spurlock and Wilson are to receive a salary allowance of $35,000 and $26,000, respectively. The remaining net income is to be divided as follows: Spurlock, 75% and Wilson, 25%.arrow_forwardConfused on this worksheetarrow_forward
- The balance in Xue's capital account includes an additional investment of $10,000 made on May 5, 20Y2. Instructions: 1. Prepare an income statement for 20Y2, indicating the division of net income. The partnership agreement provides for salary allowances of $38,000 to Ramirez and $46,000 to Xue, allowances of 10% on each partner's capital balance at the beginning of the fiscal year, and equal division of the remaining net income or a net loss. 2. prepare a statement of partnership equity for 20Y2. 3. Prepare a balance sheet as of the end of 20Y2.arrow_forwardla. Pike, Quinn, and Reed are forming a parthnershipOn March 31 of the current year, the capital accounts of the three existing partners and theirshares of profits and losses are as follows: RequirementsA partnership reports net income of $70,000. The partnership agreement has defined an incomesharing ratio, which provides for salaries of $15,000 to Pike and $10,000 to Quinn. Any remainingprofit is allocated based on profit and loss ratio. What division of profits would you recommend to Pike, Quinn and Redd?arrow_forwardRies, Bax, and Thomas invested $40,000, $56,000, and $64,000, respectively, in a partnership. During its first calendar year, the firm earned $418, 200. Required: Prepare the entry to close the firm's Income Summary account as of its December 31 year-end and to allocate the $418, 200 net income under each of the following separate assumptions. 2. The partners agreed to share income and loss in the ratio of their beginning capital investments.arrow_forward
- Entries for Allocation of Net Income Danny Spurlock and Tracy Wilson decided to form a partnership on July 1, 20-1. Spurlock invested $100,000 and Wilson invested $25,000. For the fiscal year ended June 30, 20-2, a net income of $79,000 was earned. Determine the amount of net income that Spurlock and Wilson would receive under each of the following independent assumptions: Income to be allocated $fill in the blank 1 Spurlock Wilson Total 1. There is no agreement concerning the distribution of net income. $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 2. Each partner is to receive 10% interest on their original investment. The remaining net income is to be divided equally. $fill in the blank 5 $fill in the blank 6 $fill in the blank 7 3. Spurlock and Wilson are to receive a salary allowance of $33,000 and $24,000, respectively.The remaining net income is to be divided equally. $fill in the blank 8 $fill in the blank 9 $fill in the blank 10 4. Each…arrow_forwardRies, Bax, and Thomas invested $32,000, $48,000, and $56,000, respectively, in a partnership. During its first calendar year, the firm earned $339,000. Required: Prepare the entry to close the firm's Income Summary account as of its December 31 year-end and to allocate the $339,000 net income under each of the following separate assumptions. 3. The partners agreed to share income and loss by providing annual salary allowances of $32,000 to Ries, $27,000 to Bax, and $39,000 to Thomas; granting 10% interest on the partners' beginning capital investments; and sharing the remainder equally. Complete this question by entering your answers in the tabs below. Appropriation of profits General Journal Allocate $339,000 net income by providing annual salary allowances of $32,000 to Ries, $27,000 to Bax, and $39,000 to Thomas; granting 10% interest on the partners' beginning capital investments; and sharing the remainder equally. Ries Bax Supporting Calculations Net income Salary allowances…arrow_forwardPlease solve with Explanation And Do not Give solution in image formatarrow_forward
- Partnership Entries and Statement of Partnership Equity The capital accounts of Lorraine Grecco and Carrie Rosenfeld have balances of $64,000 and $99,000, respectively, on January 1, 20Y4, the beginning of the fiscal year. On March 10, Grecco invested an additional $11,000. During the year, Grecco and Rosenfeld withdrew $43,000 and $53,000, respectively, and net income for the year was $84,000. Revenues were $654,000, and expenses were $570,000. The articles of partnership make no reference to the division of net income. a. Journalize the entry to close the revenues and expenses. If an amount box does not require an entry, leave it blank. Journalize the entry to close the drawing accounts. If an amount box does not require an entry, leave it blank. b. Prepare a statement of partnership equity for the current year for the partnership of Grecco and Rosenfeld. If an amount is zero or a blank, enter in 0.arrow_forwardAfter closing the revenue and expense accounts, the profit for the year ended December 31, 2024, of the Mitt & Ryan partnership is $28.210. The partnership agreement specifies that profits and losses will be shared using the following formula. 1. Allocate profit by a 5% interest allowance on the partners' beginning capital balances. 2 Allocate salary allowances of $20,280 to Mitt and $14,690 to Ryan. 3. Remaining profit (loss) is to be shared on a ratio of 8:5 At the beginning of the year, Mitt's capital account had a balance of $33,800 and Ryan's capital account had a balance of $35,100. Mitt withdrew $1.130 cash per month while Ryan withdrew $1,360 per month from the partnership. During the year, Mitt made an additional investment of $5,650 cash into the partnership. Prepare a schedule to show how the profit or loss will be allocated to the two partners. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Profit Interest…arrow_forwardNonearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage