The ledger of Dan Warrick and Ron Murphy, attorneys at law, contains the following accounts and balances after adjustments have been recorded on December 31, 2008:
|
|
Debit |
Credit |
|
|
Balances |
Balances |
|
Cash |
12,500 |
|
|
Accounts Receivable |
31,800 |
|
|
Supplies |
1,400 |
|
|
Land |
140,000 |
|
|
Building |
110,000 |
|
|
Accumulated Depreciation—Building |
|
46,900 |
|
Office Equipment |
46,000 |
|
|
Accumulated Depreciation—Office Equipment |
|
19,200 |
|
Accounts Payable |
|
1,600 |
|
Salaries Payable |
|
4,000 |
|
Dan Warrick, Capital |
|
95,000 |
|
Dan Warrick, Drawing |
45,000 |
|
|
Ron Murphy, Capital |
|
140,000 |
|
Ron Murphy, Drawing |
50,000 |
|
|
Professional Fees |
|
465,000 |
|
Salary Expense |
305,800 |
|
|
Depreciation Expense—Building |
6,800 |
|
|
Property Tax Expense |
2,400 |
|
|
Heating and Lighting Expense |
9,400 |
|
|
Supplies Expense |
2,100 |
|
|
Depreciation Expense—Office Equipment |
4,200 |
|
|
Miscellaneous Expense |
4,300 |
|
|
|
771,700 |
771,700 |
The balance in Murphy’s capital account includes an additional investment of $20,000 made on April 5, 2008.
Instructions
1. Prepare an income statement for the current fiscal year, indicating the division of net income.
The articles of partnership provide for salary allowances of $40,000 to Warrick and $50,000 to Murphy, 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 partners’ equity for 2008.
3. Prepare a balance sheet as of the end of 2008.