Question

The partnership of Angel Investor Associates began operations on January 1, 20Y5, with contributions from two partners as follows:

Dennis Overton $180,000
Ben Testerman 120,000

The following additional partner transactions took place during the year:

1. In early January, Randy Campbell is admitted to the partnership by contributing $75,000 cash for a 20% interest.
2. Net income of $150,000 was earned in 20Y5. In addition, Dennis Overton received a salary allowance of $40,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting Campbell.
3. The partners' withdrawals are equal to half of the increase in their capital balances from salary allowance and income.

Required:
Prepare a statement of partnership equity for the year ended December 31, 20Y5.

Answer 1

450000

Step-by-step explanation:

The statement of partners' capital shows the changes in each partner's capital account for the year or period being reported on. It has the same format as the statement of owner's equity except that it includes a column for each partner and a total column for the company rather than just one column. The statement starts with the beginning capital balance, followed by the amounts of investments made, the share of net income or loss, and withdrawals made during the reporting period to determine the capital balance at the end of the period.

Dennis Ben Randy Total capital

Balance jan1,20Y5 180,000 120,000 - 300,000

Admission of randy - - 75000 75000

Salary Allowance 40000 - - 40000

Remaining income 52800 35200 22000 110,000

Partners withdrawals (46400) (17600) (11000) (75000 )

Balance Dec 31,2015 226400 137600 86000 450000