Partnership Formation

On Jan.1, 2014 S&G Sports Partnership was formed by Simon S and Gary G.
Simon contributed $300T in cash, while Gary contributed Land/Building worth $ 250T and
Machinery worth $ 50T. Additional loan of $ 100T, i=10% was secured from Mega Bank.
The partnership provides agreement:
Simon and Gary are entitled annual salary of $100 000 and $ 60 000 per annum
Profit sharing 70%:30%= Simon: Gary
The following trial balance was available at the end of year 31 December 2014, before adjustment
of Partners's salary, interest and depreciation $5000 had been made and paid, while
administrative expenses was overcharged by $10000 for interest payable:
Description Debit Credit 175000 9%
Bank 822
Account Receivable 163 1469
Inventory 240
Land 200 Adjusting entries
Building 150 Salary expense 70
Accum. Depr. 15 Salary Payable 70
Machinery 50 Interest expense 10
Accum. Depr. 10 Administrative exp 10
Account Payable 300 Depre. expense 25
Interest Payable 16 Accum. Depr 25
SalaryPayable 70 Partnership entries
Loan from Mega Bank 200 Cash 300
Simon, Capital 400 Land & Building 250
Gary, Capital 400 Machenery 50
Simon, Drawing 50 Simon Capital 300
Gary, Drawing 50 Gary Capital 300
Sales 1,632 Cash 100
Cost of goods Sold 960 Account Payable 100
Administrative expenses 81.60
Marketing expenses 65.28
Salary expenses 120
Utility expenses 48.96
Interest Expense 16
Depreciation expense 25
Total 3,042 3,043

Instructions:
1. Prepare adjusting entries
2. Prepare Income statement
3. Schedule of income allocation and Statement of Changes in owners’ equity
4. Balance Sheet
Statement of Income allocation and changes in owners' Equity
Simon Gary Total
Net Income 204.854 110.306 315
Drawing 50 50 100
Beginning Capital 400 400 800
Ending Capital 554.854 460.306 1015.16
140 120
Income Statement
Sales 1,632
Cost of goods Sold 960
Gross profit 672
Administrative expenses 82
Marketing expenses 65
Salary expenses 120
Utility expenses 49
Interest Expense 16
Depreciation expense 25
Total Operating expense 357
Net Income before tax 315

Balance Sheet
Bank 822
Account Receivable 163.2
Inventory 240
Land 200
Building 150
Accum. Depr. 15
Machinery 50
Accum. Depr. 10
Account Payable 300
Interest Payable 16
SalaryPayable 70
Loan from Mega Bank 200
Simon, Capital 554.854
Gary, Capital 460.306
Total 1625.16 1626.16