Question

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, 2016:

Lambert and Yost

ADJUSTED TRIAL BALANCE

December 31, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	33,700.00
2	Accounts Receivable	47,400.00
3	Supplies	1,900.00
4	Land	120,100.00
5	Building	157,300.00
6	Accumulated Depreciation-Building		67,000.00
7	Office Equipment	63,500.00
8	Accumulated Depreciation-Office Equipment		22,200.00
9	Accounts Payable		27,700.00
10	Salaries Payable		5,600.00
11	Tyler Lambert, Capital		134,700.00
12	Tyler Lambert, Drawing	49,700.00
13	Jayla Yost, Capital		88,200.00
14	Jayla Yost, Drawing	60,000.00
15	Income Summary
16	Professional Fees		393,400.00
17	Salary Expense	154,200.00
18	Depreciation Expense-Building	15,800.00
19	Property Tax Expense	12,500.00
20	Heating and Lighting Expense	8,300.00
21	Supplies Expense	6,100.00
22	Depreciation Expense-Office Equipment	4,500.00
23	Miscellaneous Expense	3,800.00
24	Totals	738,800.00	738,800.00

The balance in Yost’s capital account includes an additional investment of $9,500 made on April 10, 2016.

	Required:
1.	Prepare an income statement for 2016. Create a separate statement indicating the division of net income to the partners. The partnership agreement provides for salary allowances of $44,600 to Lambert and $55,200 to Yost, 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 net loss.*
2.	Prepare a statement of partnership equity for 2016.*
3.	Prepare a balance sheet as of the end of 2016.* * Refer to the information given and the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. If a net loss is incurred or there is a decrease in partner’s equity, enter that amount as a negative number using a minus sign.

Labels and Amount Descriptions

Labels	Amount Descriptions
Current assets	Add partner withdrawals
Current liabilities	Balance, December 31, 2016
Operating expenses	Balance, January 1, 2016
Plant assets	Balances after realization
	Balances before realization
	Capital additions
	Less partner withdrawals
	Net income
	Net loss
	Net income for the year
	Net loss for the year
	Payment of liabilities
	Sale of assets and division of gain
	Total assets
	Total current assets
	Total liabilities
	Total liabilities and partners’ equity
	Total partners’ equity
	Total plant assets
	Total operating expenses

Income Statement and Allocation to Partners

1. Prepare an income statement for 2016. Create a separate statement indicating the division of net income to the partners. The partnership agreement provides for salary allowances of $44,600 to Lambert and $55,200 to Yost, 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 net loss. Refer to the information given and the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Lambert and Yost

Income Statement

For the Year Ended December 31, 2016

1
2
3
4
5
6
7
8
9
10
11

Lambert and Yost

Allocation of Net Income to Partners

For the Year Ended December 31, 2016

1		Tyler Lambert	Jayla Yost	Total
2	Division of net income:
3	Salary allowance
4	Interest allowance
5	Remaining income (loss) (1:1)
6	Net income

Statement of Partnership Equity

2. Prepare a statement of partnership equity for 2016. Refer to the information given and the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. If there is a decrease in partner’s equity, enter that amount as a negative number using a minus sign.

Lambert and Yost

Statement of Partnership Equity

For the Year Ended December 31, 2016

1		Tyler Lambert	Jayla Yost	Total
2
3
4
5
6

Balance Sheet

3. Prepare a balance sheet as of the end of 2016. Refer to the information given and the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Enter current assets in order of liquidity. Enter plant assets in the order in which they appear on the adjusted trial balance.

Lambert and Yost

Balance Sheet

December 31, 2016

1	Assets
2
3
4
5
6
7
8
9
10
11
12
13
14
15	Liabilities
16
17
18
19
20	Partners’ Equity
21
22
23
24

Answer 1

	LAMBERT AND YOST
	INCOME STATEMENT
	Professional fees		393400
	Operating expenses:
	Salary expense	154200
	Depreciation expense-Building	15800
	Property tax expense	12500
	Heating and lighting expense	8300
	Supplies expense	6100
	Depreciation expense-Office equipment	4500
	Miscellaneous expense	3800
	Total operating expenses		205200
	Net Income		188200
Allocation of Net Income to Partners
For the Year Ended December 31, 2016
1		Tyler Lambert	Jayla Yost	Total
2	Division of net income:
3	Salary allowance	44600	55200	99800
4	Interest allowance	13470	8820	22290
5	Remaining income (loss) (1:1)	33055	33055	66110
6	Net income	91125	97075	188200
	STATEMENT OF PARTNERHSIP EQUITY
		Tyler Lambert	Jayla Yost	Total
	Capital, January 1, 2016	134700	78700	213400
	Additional investment during the year	0	9500	9500
	Sub-Total	134700	88200	222900
	Net income for the year	91125	97075	188200
	Sub-Total	225825	185275	411100
	Withdrawals during the year	49700	60000	109700
	Capital, December 31,2016	176125	125275	301400
	BALANCE SHEET
	ASSETS
	Current Assets:
	Cash	33700
	Accounts receivable	47400
	Supplies	1900	83000
	Total current assets
	Plant assets:
	Land	120100
	Building	157300
	Less: accumulated depreciation	-67000
	Office equipment	63500
	Less: accumulated depreciation	-22200
	Total plant assets		251700
	Total assets		334700
	TOTAL LIABILITIES & EQUITY
	Current liabilities:
	Accounts payable	27700
	Salaries payable	5600
	Total current liabilities		33300
	Partners equity:
	Tyler Lambert, Capital	176125
	Jayla Yost, Capital	125275
	Total partners equity		301400
	Total liabilities and partners' equity		334700