The ledger of Tyler Lambert and Jayla Yost, attorneys-at-law, contains the following accounts and balances after adjustments

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, 2014:
































Lambert and Yost
Trial Balance
December 31, 2014
Debit
Balances
Credit
Balances
Cash 34,000
Accounts Receivable 47,800
Supplies 2,000
Land 120,000
Building 157,500
Accumulated Depreciation—Building 67,200
Office Equipment 63,600
Accumulated Depreciation—Office Equipment 21,700
Accounts Payable 27,900
Salaries Payable 5,100
Tyler Lambert, Capital 135,000
Tyler Lambert, Drawing 50,000
Jayla Yost, Capital 88,000
Jayla Yost, Drawing 60,000
Professional Fees 395,300
Salary Expense 154,500
Depreciation Expense—Building 15,700
Property Tax Expense 12,000
Heating and Lighting Expense 8,500
Supplies Expense 6,000
Depreciation Expense—Office Equipment 5,000
Miscellaneous Expense 3,600
740,200 740,200







The balance in Yost’s capital account includes an additional investment of $10,000 made on April 10, 2014.

Instructions

1. Prepare an income statement for 2014, indicating the division of net income. The partnership agreement provides for salary allowances of $45,000 to Lambert and $54,700 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 2014.
3. Prepare a balance sheet as of the end of 2014.


Answer:


























































1. LAMBERT AND YOST
Income Statement
For the Year Ended December 31, 2014
Professional fees $395,300
Operating expenses:
Salary expense $154,500
Depreciation expense—building 15,700
Property tax expense 12,000
Heating and lighting expense 8,500
Supplies expense 6,000
Depreciation expense—office equipment 5,000
Miscellaneous expense 3,600
Total operating expenses 205,300
Net income $190,000

Tyler Jayla
Division of net income:
Lambert Yost Total
Salary allowance………………… $45,000 $54,700 $ 99,700
Interest allowance………………… 13,500 * 7,800** 21,300
Remaining income (1:1)………… 34,500 34,500 69,000
Net income…………………………… $93,000 $97,000 $190,000
* $135,000 × 10%
** ($88,000 – $10,000) × 10%
2. LAMBERT AND YOST
Statement of Partnership Equity
For the Year Ended December 31, 2014
Tyler
Lambert
Jayla
Yost Total
Capital, January 1, 2014 $135,000 $ 78,000 $213,000
Additional investment during
the year — 10,000 10,000
$135,000 $ 88,000 $223,000
Net income for the year 93,000 97,000 190,000
$228,000 $185,000 $413,000
Withdrawals during the year 50,000 60,000 110,000
Capital, December 31, 2014 $178,000 $125,000 $303,000

3. LAMBERT AND YOST
Balance Sheet
December 31, 2014
Assets
Current assets:
Cash $ 34,000
Accounts receivable 47,800
Supplies 2,000
Total current assets $ 83,800
Plant assets:
Land $120,000
Building $157,500
Less accumulated depreciation 67,200 90,300
Office equipment $ 63,600
Less accumulated depreciation 21,700 41,900
Total plant assets 252,200
Total assets $336,000
Liabilities
Current liabilities:
Accounts payable $ 27,900
Salaries payable 5,100
Total liabilities $ 33,000
Partners’ Equity
Tyler Lambert, capital $178,000
Jayla Yost, capital 125,000
Total partners’ equity 303,000
Total liabilities and partners’ equity $336,000