On March 2, 2023, Zoe Moreau, Karen Krneta, and Veronica Visentin start a partnership to operate a personal coaching and lifestyle consulting practice for professional women. Zoe will focus on work-life balance issues, Karen on matters of style, and Veronica on health and fitness. They sign a partnership agreement to split profits in a 3:2:3 ratio for Zoe, Karen, and Veronica, respectively. The following are the transactions for MKV Personal Coaching:

2023 

Mar. 2 The partners contribute assets to the partnership at the following agreed amounts:

They also agree that the partnership will assume responsibility for Karen’s note payable of $5,000. 

Dec. 20 Zoe, Karen, and Veronica each withdraw $30,000 cash as a “year-end bonus.” No other withdrawals were made during the year. 

31 Total profit for 2023 was $110,000. 

2024 

Jan. 5 Zoe and Veronica approve Karen’s request to withdraw from the partnership for personal reasons. They agree to pay Karen $15,000 cash from the partnership. 

6 Zoe and Veronica agree to change their profit-sharing ratio to 4:5, respectively. 

Dec. 20 Zoe and Veronica withdraw $42,750 and $45,000 cash, respectively, from the partnership. 

31 Total profit for 2024 was $123,750. 

2025

Jan. 4 Zoe and Veronica agree to admit Dela Hirjikaka to the partnership. Dela will focus on providing training in organizational skills to clients. Dela invests $31,000 cash for 25% ownership of the partnership.

Instructions 

a. Record the above transactions. For the profit recognized each year, calculate how it is to be allocated and record the closing of the Income Summary account. 

b. Prepare the partners’ equity section of the balance sheet after Dela is admitted to the partnership.  

Every time a new partner is admitted to a partnership or a partner withdraws from a partnership, it is necessary to completely close the accounting records of the existing partnership and start new accounting records for the new partnership. Do you agree or disagree? Explain.   

Transcribed Image Text:

Cash Furniture Equipment Total Z. Moreau $15,000 18,000 $33,000 K. Krneta $10,000 17,000 $27,000 V. Visentin $20,000 13,000 $33,000