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, 2014

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, 2014:
































Ramirez and Xue
Trial Balance
December 31, 2014
Debit
Balances
Credit
Balances
Cash 70,300
Accounts Receivable 33,600
Supplies 5,800
Land 128,000
Building 175,000
Accumulated Depreciation—Building 80,000
Office Equipment 42,000
Accumulated Depreciation—Office Equipment 25,300
Accounts Payable 12,400
Salaries Payable 10,000
Camila Ramirez, Capital 125,000
Camila Ramirez, Drawing 35,000
Ping Xue, Capital 155,000
Ping Xue, Drawing 50,000
Professional Fees 555,300
Salary Expense 384,900
Depreciation Expense—Building 12,900
Heating and Lighting Expense 10,500
Depreciation Expense—Office Equipment 6,300
Property Tax Expense 3,200
Supplies Expense 3,000
Miscellaneous Expense 2,500
963,000 963,000








The balance in Xue’s capital account includes an additional investment of $20,000 made on May 5, 2014.

Instructions
1. Prepare an income statement for the current fiscal year, indicating the division of net income. The partnership agreement provides for salary allowances of $50,000 to Ramirez and $65,000 to Xue, allowances of 12% 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 2014.
3. Prepare a balance sheet as of the end of 2014.


Answer:

























































1.

RAMIREZ AND XUE
Income Statement
For the Year Ended December 31, 2014
Professional fees $555,300
Operating expenses:
Salary expense $384,900
Depreciation expense—building 12,900
Heating and lighting expense 10,500
Depreciation expense—office equipment 6,300
Property tax expense 3,200
Supplies expense 3,000
Miscellaneous expense 2,500
Total operating expenses 423,300
Net income $132,000
Camila Ping
Division of net income:
Ramirez Xue Total
Salary allowance………………………… $50,000 $65,000 $115,000
Interest allowance……………………… 15,000 * 16,200 ** 31,200
Remaining income (loss) (1:1)……… (7,100) (7,100) (14,200)
Net income………………………………… $57,900 $74,100 $132,000
* $125,000 × 12%
** ($155,000 – $20,000) × 12%
2. RAMIREZ AND XUE
Statement of Partnership Equity
For the Year Ended December 31, 2014
Camila
Ramirez
Ping
Xue Total
Capital, January 1, 2014 $125,000 $135,000 $260,000
Additional investment during
the year — 20,000 20,000
$125,000 $155,000 $280,000
Net income for the year 57,900 74,100 132,000
$182,900 $229,100 $412,000
Withdrawals during the year 35,000 50,000 85,000
Capital, December 31, 2014 $147,900 $179,100 $327,000

3. RAMIREZ AND XUE
Balance Sheet
December 31, 2014
Assets
Current assets:
Cash $ 70,300
Accounts receivable 33,600
Supplies 5,800
Total current assets $109,700
Plant assets:
Land $128,000
Building $175,000
Less accumulated depreciation 80,000 95,000
Office equipment $ 42,000
Less accumulated depreciation 25,300 16,700
Total plant assets 239,700
Total assets $349,400
Liabilities
Current liabilities:
Accounts payable $ 12,400
Salaries payable 10,000
Total liabilities $ 22,400
Partners’ Equity
Camila Ramirez, capital $147,900
Ping Xue, capital 179,100
Total partners’ equity 327,000
Total liabilities and partners’ equity $349,400