Snack Shack is a fast-food restaurant that is operated as a partnership of three individuals. The three partners share profits equally. The following selected account balances are for the current year before any closing entries are made:

Instructions
On the basis of this information, answer the following questions and show any necessary computations.
a. How much must each of the three partners report on his individual income tax return related to this business?
b. Prepare a Statement of Partners' Equity for the current year ended December 31. Assume that no partner has made an additional investment during the year.
c. Assuming that each of the partners devotes the same amount of time to the business, why might Glen and Chow consider the profit-sharing agreement to be inequitable?
d. Which factors should the partners consider when evaluating whether the profit from the partnership is adequate?

Transcribed Image Text:

Debit Glen, Capital Chow, Capital Wilkes, Capital Credit $55,000 60,000 5,000 Chow, Drawing Wilkes, Drawing $15,000 15,000 25,000 90,000