Question

The ledger of Camila Ramirez and Ping Xue, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y2:

Ramirez and Xue
Trial Balance
December 31, 20Y2
	Debit Balances		Credit Balances
Cash	51,200
Accounts Receivable	48,800
Supplies	1,800
Land	122,000
Building	132,400
Accumulated Depreciation—Building			76,300
Office Equipment	56,100
Accumulated Depreciation—Office Equipment			23,700
Accounts Payable			36,400
Salaries Payable			3,900
Camila Ramirez, Capital			120,000
Camila Ramirez, Drawing	54,900
Ping Xue, Capital			73,200
Ping Xue, Drawing	79,300
Professional Fees			444,200
Salary Expense	178,100
Depreciation Expense—Building	17,700
Property Tax Expense	11,000
Heating and Lighting Expense	8,800
Supplies Expense	6,300
Depreciation Expense—Office Equipment	5,500
Miscellaneous Expense	3,800
	777,700		777,700

The balance in Xue' capital account includes an additional investment of $12,000 made on May 5, 20Y2.

Required:

1. Prepare an income statement for 20Y2, indicating the division of net income. The partnership agreement provides for salary allowances of $49,000 to Ramirez and $60,000 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 net loss.

Ramirez and Xue Income Statement For the Year Ended December 31, 20Y2
Professional Fees
Operating expenses:
Salary Expense
Depreciation Expense-Building
Property Tax Expense
Heating and Lighting Expense
Supplies Expense
Depreciation Expense-office Equipment
Miscellaneous Expense
Total operating expenses
Net Income		$

2. Prepare a statement of partnership equity for 20Y2. If any amounts are zero, enter in "0".

Ramirez and Xue Statement of Partnership Equity For the Year Ended December 31, 20Y2
	Camila Ramirez	Ping Xue	Total
Balances, January 1, 20Y2
Capital additions
Net income for the year
Partner withdrawals
Balances, December 31, 20Y2	$	$	$

3. Prepare a balance sheet as of the end of 20Y2.

Ramirez and Xue Balance Sheet December 31, 20Y2
Assets
Current assets:
Total current assets			$
Property, plant, and equipment:
Total property, plant, and equip.
Total assets			$
Liabilities
Current liabilities:
Total liabilities
Partners' Equity
Total partners' equity
Total liabilities and partners' equity			$

Answer 1

Solution:
1	Ramirez and Xue
	Income Statement
	For the year Ended December 31,20Y2
	Professional Fees		$444,200
	Operating expenses
	Salary expenses	$178,100
	Depreciation expense- building	$17,700
	Property Tax expense	$11,000
	Heating and Lighting Expense	$8,800
	Supplies Expense	$6,300
	Depreciation expense- office equipment	$5,500
	Miscellanoeus expenses	$3,800
	Total Operating expenses		($231,200)
	Net Income		$213,000
		Camila Ramirez	Ping Xue	Total
	Net Income			$213,000
	Salary Allowances	$49,000	$60,000	($109,000)
	Balance Profit allocated			$104,000
	Interest on capital @10%	$12,000	$6,120	($18,120)
		($120,000*10%)	[($73,200-$12,000)*10%]
				$85,880
	Balance profit allocated equally	$42,940	$42,940	($85,880)
	Share of partners	$103,940	$109,060	$0
2	Ramirez and Xue
	Statement of Partnership equity
	For the year Ended December 31,20Y2
		Camila Ramirez	Ping Xue	Total
	Balances January 1,20Y2	$120,000	$61,200	$181,200
	Capital additions	$61,000	$78,120	$139,120
		($49,000+$12,000)	($12,000+$60,000+$6,120)
	Net income for the year	$42,940	$42,940	$85,880
	Partner withdrawals	($54,900)	($79,300)
	Balances, December 31, 20Y2	$169,040	$102,960	$272,000
3	Ramirez and Xue
	Balance Sheet
	December 31, 20Y2
	Assets
	Current Assets
	Cash	$51,200
	Accounts receivable	$48,800
	Supplies	$1,800
	Total current Assets		$101,800
	Property , plant and equipment
	Land		$122,000
	Building	$132,400
	Less: Accumulated depreciation	$76,300	$56,100
	Office equipment	$56,100
	Less: Accumulated depreciation	$23,700	$32,400
	Total Assets		$312,300
	Liabilities
	Current Liabilities
	Accounts payable	$36,400
	Salaries payable	$3,900
	Total current liabilities		$40,300
	Equity
	Camila Ramirez's capital	$169,040
	Ping Xue's Capital	$102,960	$272,000
	Total Liabilities and equity		$312,300
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