Below is the adjusted trial balance for Pearson, Specter and Litt at December 31, 2020. The partnership began on January 1, 2020 and this is the year-end numbers. Accounts payable Accounts receivable Accumulated amortization, patent Accumulated depreciation, fixture Accumulated depreciation, furniture Allowance for doubtful accounts Amortization expense, patent Bad debt expense Cash Depreciation expense, fixtures Depreciation expense, furniture Fixtures Furniture Jane Pearson, capital Jane Pearson, withdrawals Hans Specter, capital Hans Specter, withdrawals Larry Litt, capital Larry Litt, withdrawals Merchandise inventory Notes payable, due 2023** Patent Prepaid rent Rent expense Sales Sales discounts Sales returns and allowances Unearned sales Wages expense 13,500 41,800 6,000 3,000 6,000 1,400 2,000 2,700 32,250 3,000 6,000 32,000 72,000 83,100 22,700 71,550 23,300 65,100 41,600 22,500 15,000 22,000 18,000 84,000 221,000 6,100 5,800 3,100 51,000 Create the income statement for the year ended December 31, 2020. Complete the closing entries for Steps 1 and 2. (Second tab) Prepare calculations showing how the profit should be allocated to the partners under each of the following plans for sharing profit and losses: (Third tab) a. The partners failed to agree on a method of sharing profit. b. The partners agreed to share profits and losses in proportion to their initial investments. c. The partners agreed to share profit and losses in a 6:2:2 ratio. d. They agreed to share profits/(losses) by providing yearly salary allowances of $40,000 to Pearson and $25,000 to Specter, 10% interest allowances on their initial capital investments, and sharing the remainder equally. e. Record the journal entry from your calculations in d. f. Step 3: Present the journal entry based on your calculations above. g. Step 4: Prepare the journal entry to close out the withdrawal accounts: h. Calculate the closing capital balances for each partner at the end of the year once all the closing entries have been completed. Use the profit/loss allocation you did in d. and created journal entries for as the profit/loss method selected. Below is the adjusted trial balance for Pearson, Specter and Litt at December 31, 2020. The partnership began on January 1, 2020 and this is the year end numbers. Create the income statement for the year ended December 31, 2020. Complete the closing entries for Steps 1 and 2. Date Account Titles Debits Credits Accounts payable Accounts receivable Accumulated amortization, patent Accumulated depreciation, fixture Accumulated depreciation, furniture Allowance for doubtful accounts Amortization expense, patent Bad debt expense Cash Depreciation expense, fixtures Depreciation expense, furniture Fixtures Furniture Jane Pearson, capital Jane Pearson, withdrawals Hans Specter, capital Hans Specter, withdrawals Larry Litt, capital Larry Litt, withdrawals Merchandise inventory Notes payable, due 2023** Patent Prepaid rent Rent expense Sales Sales discounts Sales returns and allowances Unearned sales Wages expense 13,500 41,800 6,000 3,000 6,000 1,400 2,000 2,700 32,250 3,000 6,000 32,000 72,000 83,100 22,700 71,550 23,300 65,100 41,600 22,500 15,000 22,000 18,000 84,000 221,000 6,100 5,800 3,100 51,000 (There are extra rows included here.) Prepare calculations showing how the profit should be allocated to the partners under each of the following plans for sharing profit and losses: a. The partners failed to agree on a method of sharing profit. Profit/Loss Pearson Specter Litt Show calculations: b. The partners agreed to share profits and losses in proportion to their initial investments. Profit/Loss Pearson Specter Litt Show calculations: C. The partners agreed to share profit and losses in a 6:2:2 ratio. Profit/Loss Pearson Specter Litt Show calculations: d. They agreed to share profits/(losses) by providing yearly salary allowances of $40,000 to Pearson and $25,000 to Specter, 10% interest allowances on their initial capital investments, and sharing the remainder equally. Pearson Specter Litt Total d. They agreed to share profits/(losses) by providing yearly salary allowances of $40,000 to Pearson and $25,000 to Specter, 10% interest allowances on their initial capital investments, and sharing the remainder equally. Pearson Specter Litt Total Totals e. Step 3: Present the journal entry based on your calculations above in d. Account Titles Debit Credit f. Step 4: Prepare the journal entry to close out the withdrawal accounts: Account Titles Debit Credit g. Calculate the closing capital balances for each partner at the end of the year once all the closing entries have been completed. Use the profit/loss allocation you did in d. and created journal entries for as the profit/loss method selected. Pearson Specter Litt Total equity
