18 Formation of a Partnership and Allocation of Profit and Loss Haskins and Sells formed a partnership on January 2, 20X3. Each had been a sole proprietor before forming their partnership. Part 1 Each partner's contributions follow. The amounts under the cost column represent the amounts reported on the books of each sole proprietorship immediately before the formation of the partnership. Cost Fair Value $ 45,000 48,000 40,000 (1.500) 550.000 (200,000) (175,000) $ 45,000 49,000 40,000 (2.000) 370,000 Haskins Cash Inventories (FIFO) Trade accounts receivable Allowance for uncollectible accounts Building Accumulated depreciation Mortgage on building assumed by partnership Sells: Cash Trade accounts receivable Allowance for uncollectible accounts Inventories (FIFO) Note receivable due in 6 months Temporary investments Customer lists (175,000) $ 10,000 30,000 (2.000) 15,000 50,000 100,000 o $ 10,000 30,000 (2,500) 13,500 50,000 81,500 60,000 Required Using the preceding information, prepare a classified balance sheet as of January 2, 20X3, for the Haskins and Sells partnership. Assume that $25,000 of the mortgage is due in 20x3 and that the customer lists are accounted for as an intangible asset to be amortized over a five-year period. $650.000 320,000 70,000 Part 11 During 20X3, the Haskins and Sells Partnership reported the following information: Revenues Cost of goods sold Selling general, and administrative expenses Salaries paid to each partner (not included in seling, general, and administrative expenses) Hoskins Sells Bonus paid to Haskins (not included in seling, general. and administrative expenses) Withdrawals made during the year in addition to salaries: Haskins Sells Residual profit and loss-sharing ratio: Haskins Sells 90,000 70,000 10% of net income 10.000 5.000 20% 80% Required a. Prepare an income statement for the Haskins and Sells partnership for the year ended December 31, 20X3. b. Prepare a schedule that shows how to allocate the partnership net income for 20x3. c. What is the capital balance for each partner that will appear on the December 31, 20X3, balance sheet d. Assume that the distribution of partnership net income remains the same (i.e., Haskins will continue to receive a 10 percent bonus and salaries will continue to be $90,000 and $70,000 to Haskins and Sells, respectively) and the residual profit and loss-sharing ratio will continue to be 20:80. What would partnership net income have to be for each partner to receive the same amount of inen