Reference no: EM132696350

Question - Tyler Gilligan and Matt Melnyk, two college friends, decided to set up a snow removal business called Cullumber Snow Removal Services. At the inception of the partnership, Tyler invested $4,000 cash and Matt invested $11,000 cash. Once formed, the partnership purchased equipment and a vehicle. Tyler estimates that the equipment purchased for $2,000 and the vehicle purchased for $10,000 have five-year useful lives, with no residual value. He used the straight-line method to calculate depreciation expense. At the end of the first year of business, Tyler, who was studying accounting, provided the following information:

CULLUMBER SNOW REMOVAL SERVICES Income Statement Year ended December 31, 2021

Service revenue $49,360

Expenses

Supplies expense $5,270

Depreciation expense 2,400

Salaries expense 30,210 37,880

Profit $11,480

Additional information:

1. Salaries expense is $19,980 and $10,230 cash that was paid to Tyler and Matt, respectively, during the year.

2. All revenues were collected in cash.

3. All supplies were paid for in cash. At the end of the year, there were no supplies on hand.

4. There is $16,880 in the bank account at December 31, 2021.

Required -

1. Make a journal entry to correct the errors, if any, on the income statement.

2. Calculate the correct profit and the amount to be allocated to each partner a statement of partners' equity for the year ended December 31, 2021.

3. Make a balance sheet at December 31, 2021.