Reference no: EM132058792
Question - April, June, and Janet started a partnership on Jan 1, 2015 (AJUJA ENTERPRISES). April contributed cash of $60,000 for 20% equity interest. June contributed cash of $40,000 and equipment with a market value of $80,000 for 40% equity interest (The original cost of the equipment was $200,000 and it had an accumulated depreciation of $150,000). Janet contributed land, and a building, where the business would be operated. The land was valued at $120,000 and had a mortgage attached of $50,000. The building was valued at $50,000. The partnesrhip assumed responsibility of the mortgage. On June 30, after approval by the other partners, June sold her partnership interest to Octopus for $172,500. On December 1, April decided to retire/withdraw from the partnership; she was paid $150,000 in partnership cash and was also given a partnership car whose cost had been $25,000, and accumulated depreciation to that date was $4,800. The net income for the year, which was accrued evenly for all months, is $876,500. The partners have agreed to share net income as follows: (1). All partners are to receive 10% interest on their initial capital balances (Octopus will receive the interest that June was receiving upon admission); (2). April is to receive a $5,000 salary allowance per month and Janet is to receive a $6,000 salary allowance per month. The remaining balance will be shared according to the partners equity interests. The partners also made the following withdrawals: April $58,000; June $75,000; Janet $82,000; Octopus $12,000)
1. Show how the net income for the year would be allocated to the partners
2. Compute the ending capital balances for all partners' accounts as at Dec 31, 2015.
3. Given the following balances, prepare a balance sheet for the partnership as at Dec 31, 2015
Taxes Payable $ 12,350.00
Accounts Payable 27,500.00
Long-term debt 70,400.00
Inventory 81,250.00
Accounts Receivable 125,000.00
Cash and Cash Equivalents 225,750.00
Property, plant, and Equipment 457,550.00