John and Jane formed a partnership, JJ Enterprises, on January 1, 2023, with the following details:
1.Initial Contributions and Transactions:
•John contributed cash of $50,000 and equipment valued at $30,000.
•Jane contributed cash of $40,000 and inventory valued at $20,000.
•The partnership agreement states that profits and losses are shared in a 60:40 ratio between John and Jane.
2.Operations:
•The partnership earned service revenues of $150,000 and incurred expenses of $90,000.
•Additional inventory was purchased for $25,000 on credit.
•Paid operating expenses of $30,000.
3.Adjustments:
•Depreciation on equipment was $5,000.
•Accrued salaries payable of $4,000.
4.Withdrawals:
•John withdrew $10,000 in cash during the year.
•Jane withdrew $8,000 in cash during the year.
Tasks:
1.Journal Entries:
•Prepare journal entries for the transactions and adjustments provided.
2.Trial Balance:
•Prepare a trial balance before and after the adjusting entries.
3.Financial Statements:
•Prepare the income statement and balance sheet for JJ Enterprises for the year ending December 31, 2023.
4.Statement of Partners' Equity:
•Prepare the statement of partners' equity showing the changes in each partner’s capital account.
5.Discussion:
•Explain the significance of the profit-sharing ratio and how it affects the partners' equity.