Gray, Stone, and Lawson open an accounting practice on January 1, 2013, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $210,000, $180,000, and $90,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations: Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year. Profits and losses are allocated according to the following plan: (1) A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by (2) Interest is credited to the partners' capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings). (3) An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that the bonus cannot be a negative amount. (4) Any remaining partnership profit or loss is to be divided evenly among all partners Because of monetary problems encountered in getting the business started, Gray invests an additional $9,100 on May 1, 2013. On January 1, 2014, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 25 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monet's entrance into the firm; the general provisions continue to be applicable. The billable hours for the partners during the first three years of operation follow 2013 2014 2015 Gray 1.710 1,800 1,880 Stone 1,440 1,500 1,620 Lawson 1,300 1,380 Monet 1,190 1,580 1,310 0 The partnership reports net income for 2013 through 2015 as follows: 2013 2014 2015 $ 65,000 (20.400) 152,800 Each partner withdraws the maximum allowable amount each year, a. Determine the allocation of income for each of these three years. (Loss amounts should be indicated with a minus sign. Round your answers to the nearest dollar amounts.) a. Determine the allocation of income for each of these three years. (Loss amounts should be indicated with a minus sign. Round your answers to the nearest dollar amounts.) Income Allocation-2013 Gray Stone Lawson Totals $ 0 0 Salary allowance Interest Bonus Remaining profitloss Income allocation 0 0 $ 0 0 $ $ 0 Income Allocation 2014 Gray Stone Lawson Monet Totals $ 0 0 Salary allowance Interest Bonus Remaining profitioss Income allocation $ 010 0 0 $ 0 $ 0 $ 0 $ $ Income Allocation-2015 Stone Lawson Gray Monet Totals $ 0 Salary allowance Interest Bonus Remaining profitioss Income allocation 0 0 $ 0 $ 0 S 0 S 0 $ 0 b. Prepare in appropriate form a statement of partners' capital for the year ending December 31, 2015. (Amounts to be deducted should be indicated with minus sign. Round your answers to nearest dollar amounts.) Capital Account Balances 1/1/15 - 12/31/15 Beginning balances Profit allocation Drawings Income allocation GRAY, STONE, LAWSON, and MONET Statement of Partners' Capital For the Year Ending December 31, 2015 Gray Stone Lawson Monet $ 198,598 $ 161,054 S 82,759 $144,510 44,812 42,356 31,429 34,203 (19,860) (16,105) (8.276) (14.451) $ 223,550 $ 187,305 $ 105,912 $164,262 Totals $ 586,921 152,800 (58,692) $ 681,029
