Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 47

Financial statements for partnerships
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, 2016:

The balance in Xue's capital account includes an additional investment of $20,000 made on May 5, 2016.
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 2016.
3. Prepare a balance sheet as of the end of 2016.