Question

In: Accounting

After closing the revenue and expense accounts, the profit for the year ending December 31, 2017...

After closing the revenue and expense accounts, the profit for the year ending December 31, 2017 of the Mo & Molly partnership is $129,000. The partnership agreement specifies that profits and losses will be shared using the following formula.

1. Allocate salary allowances of $24,000 to Mo and $30,000 to Molly.
2. Remaining profit (loss) is to be shared on a ratio of 2:1.


At the beginning of the year, Mo’s capital account had a balance of $45,000 and Molly’s capital account had a balance of $26,000. Mo withdrew $1,400 cash per month while Molly withdrew $2,800 per month from the partnership.

Prepare a schedule to show how the profit will be allocated to the two partners.
Prepare a statement of partners’ equity for the year.

Solutions

Expert Solution

Distribution of partnership profit

MO

Molly

Total

Beginning cash balance

$    45,000

$   26,000

$   71,000

Less: Drawings

$ (16,800)

$ (33,600)

$ (50,400)

Capital Before Distribution of profit

$    28,200

$   (7,600)

$   20,600

Net Profit

$   61,000

Salary

$    24,000

$   30,000

$ (54,000)

Profit left for Distribution

$       4,667

$     2,333

$      7,000

Ending Balance of capital

$    56,867

$   24,733

$   81,600

Leave a comment if answer does not match

Statement of partner's equity

MO

Molly

Beginning cash balance

$    45,000

$   26,000

Add: Salary Allowance

$    24,000

$   30,000

Add: Income share

$       4,667

$     2,333

Balance vefire drawings

$    73,667

$   58,333

Less: Drawings

$ (16,800)

$ (33,600)

Ending cash balance

$    56,867

$   24,733

ekkarill92 answered 3 years ago
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