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	34,000.00
2	Accounts Receivable	47,900.00
3	Supplies	1,900.00
4	Land	119,800.00
5	Building	157,200.00
6	Accumulated Depreciation-Building		67,300.00
7	Office Equipment	63,500.00
8	Accumulated Depreciation-Office Equipment		21,500.00
9	Accounts Payable		28,200.00
10	Salaries Payable		4,700.00
11	Tyler Lambert, Capital		134,700.00
12	Tyler Lambert, Drawing	50,000.00
13	Jayla Yost, Capital		88,500.00
14	Jayla Yost, Drawing	60,500.00
15	Income Summary
16	Professional Fees		394,600.00
17	Salary Expense	154,300.00
18	Depreciation Expense-Building	15,500.00
19	Property Tax Expense	11,800.00
20	Heating and Lighting Expense	8,700.00
21	Supplies Expense	6,000.00
22	Depreciation Expense-Office Equipment	5,000.00
23	Miscellaneous Expense	3,400.00
24	Totals	739,500.00	739,500.00

The balance in Yost’s capital account includes an additional investment of $9,600 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 $45,400 to Lambert and $55,100 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 $45,400 to Lambert and $55,100 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

STATEMENT OF INCOME
							Amount $
Professional fees							394,600
Less: Operating expense
	Salary Expense			154,300
	Depreciation expense			15,500
	Depreciation -Equipment			5,000
	Property tax			11,800
	Heating and lighting			8,700
	Supplies expense			6,000
	Misc expense			3,400			204700
Net Income Earned							189900
STATEMENT SHWOING DISTRIBUTION OF PROFITS AMONG PARTNERS
				TYLER	YOST	TOTAL
Division of net income:
Salary				45400	55100	100500
Interest allowance at 10%				13470	8850	22320
Remaining income 1:1				33540	33540	67080
Net Income				92410	97490	189900
STATEMENT OF PARTNERS EQUITY
					TYLER	YOST	TOTAL
Beginning Capital					134700	88500	223,200
Less: Drawings					50000	60500	110,500
Add: Net income earned					92410	97490	189,900
Ending Capital					177110	125490	302600
BALANCE SHEET
							Amount $
ASSETS:
Current Assets:
	Cash					34000
	Accounts Receivable					47900
	Supplies					1900	83800
Fixed Assets:
	Land					119800	119800
	Building					157200
	Less: Accumulated Depreciation					67300	89900
	Equipment					63500
	Less: Accumulated Depreciation					21500	42000
				TOTAL ASSETS			335,500
LIABILITIES:
Current Liabilities:
	Accounts Payable					28,200
	Salaries payable					4,700	32,900
Partners equity
	Tyler capital					177,110
	Yost Capital					125,490	302,600
				TOTAL LIABILITIES			335,500