Question
After closing the revenue and expense accounts, the profit for the year ended December 31, 2021 of the Mo & Molly partnership is $111,000. The
After closing the revenue and expense accounts, the profit for the year ended December 31, 2021 of the Mo & Molly partnership is $111,000. The partnership agreement specifies that profits and losses will be shared using the following formula.
| 1. | Allocate salary allowances of $27,000 to Mo and $36,000 to Molly. | |
| 2. | Remaining profit (loss) is to be shared on a ratio of 2:1. |
At the beginning of the year, Mos capital account had a balance of $30,000 and Mollys capital account had a balance of $24,000. Mo withdrew $1,800 cash per month while Molly withdrew $3,600 per month from the partnership.
Prepare a schedule to show how the profit will be allocated to the two partners.
| MO & MOLLY Division of Profit Year Ended December 31, 2021 | |||||||||
| Mo | Molly | Total | |||||||
| Profit | $ | $ | $ | ||||||
| Salary allowance | |||||||||
| Mo | |||||||||
| Molly | |||||||||
| Total | |||||||||
| Profit remaining for allocation | |||||||||
| Fixed ratio | |||||||||
| Mo | |||||||||
| Molly | |||||||||
| Total | |||||||||
| Profit remaining for allocation | |||||||||
| Profit allocated to the partners | $ | $ | $ | ||||||
eTextbook and Media
Prepare a statement of partners equity for the year. (List items that increase partner's equity first.)
| MO & MOLLY Statement of Partners Equity Year Ended December 31, 2021 | ||||||
| Mo | Molly | Total | ||||
| DrawingsGross Profit / (Loss)Capital, January 1Total ExpensesProfit / (Loss)ExpensesTotal RevenuesCapital, December 31RevenuesInvestments | $ | $ | $ | |||
| AddLess: | ||||||
| RevenuesTotal ExpensesExpensesProfit / (Loss)Capital, January 1Total RevenuesDrawingsGross Profit / (Loss)InvestmentsCapital, December 31 | ||||||
| Capital, December 31InvestmentsProfit / (Loss)DrawingsRevenuesTotal ExpensesTotal RevenuesExpensesCapital, January 1Gross Profit / (Loss) | ||||||
| AddLess: DrawingsProfit / (Loss)ExpensesCapital, January 1Total RevenuesCapital, December 31InvestmentsTotal ExpensesGross Profit / (Loss)Revenues | ||||||
| Capital, December 31Gross Profit / (Loss)Capital, January 1ExpensesProfit / (Loss)Total ExpensesTotal RevenuesDrawingsInvestmentsRevenues | $ | $ | $ | |||
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