The ledger of Tyler Lambert and Jayla Yost, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 2014:

$$\begin{array}{c} \textbf{Lambert and Yost}\\ \textbf{Trial Balance}\\ \textbf{December 31, 2014} \end{array}$$

$$\begin{array}{lrr} \hline{\text{}}&\textbf{Debit}\hspace{8pt}&\textbf{Credit}\hspace{5pt}\\ {\text{}}&\textbf{Balances}&\textbf{Balances}\\\hline \text{Cash}&\text{34,000}\\ \text{Accounts Receivable}&\text{47,800}\\ \text{Supplies}&\text{2,000}\\ \text{Land}&\text{120,000}\\ \text{Building}&\text{157,500}\\ \text{Accumulated Depreciation—Building}&&\text{67,200}\\ \text{Office Equipment}&\text{63,600}\\ \text{Accumulated Depreciation—Office Equipment}&&\text{21,700}\\ \text{Accounts Payable}&&\text{27,900}\\ \text{Salaries Payable}&&\text{5,100}\\ \text{Tyler Lambert, Capital}&&\text{135,000}\\ \text{Tyler Lambert, Drawing}&\text{50,000}\\ \text{Jayla Yost, Capital}&&\text{88,000}\\ \text{Jayla Yost, Drawing}&\text{60,000}\\ \text{Professional Fees}&&\text{395,300}\\ \text{Salary Expense}&\text{154,500}\\ \text{Depreciation Expense—Building}&\text{15,700}\\ \text{Property Tax Expense}&\text{12,000}\\ \text{Heating and Lighting Expense}&\text{8,500}\\ \text{Supplies Expense}&\text{6,000}\\ \text{Depreciation Expense—Office Equipment}&\text{5,000}\\ \text{Miscellaneous Expense}&\text{\underline{\hspace{10pt}3,600}}&\text{\underline{\hspace{33pt}}}\\ &\underline{\underline{\text{740,200}}}&\underline{\underline{\text{740,200}}}\\ \end{array}$$

The balance in Yost’s capital account includes an additional investment of $10,000 made on April 10, 2014.

Instructions

1. Prepare an income statement for 2014, indicating the division of net income. The partnership agreement provides for salary allowances of$45,000 to Lambert and $54,700 to Yost, allowances of 10% on each partner’s capital balance at the bbeginningof the fiscal year, and equal division of the remaining net income or net loss.
2. Prepare a statement of partnership equity for 2014.
3. Prepare a balance sheet as of the end of 2014.

The ledger of Camila Ramirez and Ping Xue, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 2014:

$$\begin{array}{c} \textbf{Ramirez and Xue}\\ \textbf{Trial Balance}\\ \textbf{December 31, 2014} \end{array}$$

$$\begin{array}{lrr} \hline{\text{}}&\textbf{Debit}\hspace{8pt}&\textbf{Credit}\hspace{5pt}\\ {\text{}}&\textbf{Balances}&\textbf{Balances}\\\hline \text{Cash}&\text{70,300}\\ \text{Accounts Receivable}&\text{33,600}\\ \text{Supplies}&\text{5,800}\\ \text{Land}&\text{128,000}\\ \text{Building}&\text{175,000}\\ \text{Accumulated Depreciation—Building}&&\text{80,000}\\ \text{Office Equipment}&\text{42,000}\\ \text{Accumulated Depreciation—Office Equipment}&&\text{25,300}\\ \text{Accounts Payable}&&\text{12,400}\\ \text{Salaries Payable}&&\text{10,000}\\ \text{Camila Ramirez, Capital}&&\text{125,000}\\ \text{Camila Ramirez, Drawing}&\text{35,000}\\ \text{Ping Xue, Capital}&&\text{155,000}\\ \text{Ping Xue, Drawing}&\text{50,000}\\ \text{Professional Fees}&&\text{555,300}\\ \text{Salary Expense}&\text{384,900}\\ \text{Depreciation Expense—Building}&\text{12,900}\\ \text{Heating and Lighting Expense}&\text{10,500}\\ \text{Depreciation Expense—Office Equipment}&\text{6,300}\\ \text{Property Tax Expense}&\text{3,200}\\ \text{Supplies Expense}&\text{3,000}\\ \text{Miscellaneous Expense}&\text{\underline{\hspace{10pt}2,500}}&\text{\underline{\hspace{33pt}}}\\ &\underline{\underline{\text{963,000}}}&\underline{\underline{\text{963,000}}}\\ \end{array}$$

The balance in Xue’s capital account includes an additional investment of $20,000 made on May 5, 2014.

Instructions

1. Prepare an income statement for the current fiscal year, indicating the division of net income. The partnership agreement provides for salary allowances of$50,000 to Ramirez and $65,000 to Xue, allowances of 12% on each partner’s capital balance at the beginning of the fiscal year, and equal division of the remaining net income or net loss.
2. Prepare a statement of partnership equity for 2014.
3. Prepare a balance sheet as of the end of 2014.

On March $1$, Eckert and Kelley formed a partnership. Eckert contributed $\$82,500$ cash, and Kelley contributed land valued at $\$60,000$ and a building valued at $\$100,000$. The partnership also took Kelley’s $\$92,500$ long-term note payable associated with the land and building. The partners agreed to share income as follows: Eckert gets an annual salary allowance of $\$25,000$, both get an annual interest allowance of $10\%$ of their initial capital investment, and any remaining income or loss is shared equally. On October $20$, Eckert withdrew $\$34,000$ cash and Kelley withdrew $\$20,000$ cash. After adjusting and closing entries are made to the revenue and expense accounts at December $31$, the Income Summary account had a credit balance of $\$90,000$.

1. Prepare journal entries to record (a) the partners’ initial capital investments, (b) their cash withdrawals, and (c) the December $31$ closing of both the withdrawals and Income Summary accounts.

2. Determine the balances of the partners’ capital accounts as of December $31$.

John Prado and Ayana Nicks formed a partnership, dividing income as follows:

1. Annual salary allowance to Nicks of $38,000.
2. Interest of 5% on each partner’s capital balance on January 1.
3. Any remaining net income divided equally.

Prado and Nicks had$20,000 and $50,000, respectively, in their January 1 capital balances. Net income for the year was$112,000. How much net income should be distributed to Nicks?

The Struter Partnership has total partners’ equity of $510,000, which is made up of Main, Capital,$400,000, and Frist, Capital, $110,000. The partners share net income and loss in a ratio of 80% to Main and 20% to Frist. On November 1, Adison is admitted to the partnership and given a 15% interest in equity and a 15% share in any income and loss. Prepare the journal entry to record the admission of Adison under each separate assumption: Adison invests cash of (1)$90,000; (2) $120,000; and (3)$80,000.

Dave Krug contributed $1,000 cash along with inventory and land to a new partnership. The inventory had a book value of$800 and a market value of $2,000. The land had a book value of$1,400 and a market value of $5,000. The partnership also accepted a$3,000 note payable owed by Krug to a creditor. Prepare the partnership’s journal entry to record Krug’s investment.

Andrew Orr and Victoria Graham formed a partnership, dividing income as follows:

1. Annual salary allowance to Orr of $28,000.
2. Interest of 6% on each partner’s capital balance on January 1.
3. Any remaining net income divided to Orr and Graham, 2:1.

Orr and Graham had$60,000 and $150,000, respectively, in their January 1 capital balances. Net income for the year was$46,000. How much net income should be distributed to Orr?

The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:

$$\begin{array}{llrccllr} \text{211}&\text{Salaries Payable}&\hspace{5pt}-&&&\text{218}&\text{Bond Deductions Payable}&\$\hspace{15pt}3,400\\ \text{212}&\text{Social Security Tax Payable}&{\$\hspace{10pt}9,273}&&&\text{219}&\text{Medical Insurance Payable}&{27,000}\\ \text{213}&\text{Medicare Tax Payable}&{2,318}&&&\text{411}&\text{Operations Salaries Expense}&{950,000}\\ \text{214}&\text{Employees Federal Income Tax Payable}&{15,455}&&&\text{511}&\text{Officers Salaries Expense}&{600,000}\\ \text{215}&\text{Employees State Income Tax Payable}&{13,909}&&&\text{512}&\text{Office Salaries Expense}&{150,000}\\ \text{216}&\text{State Unemployment Tax Payable}&{1,400}&&&\text{519}&\text{Payroll Tax Expense}&{137,951}\\ \text{217}&\text{Federal Unemployment Tax Payable}&{500}\\ \end{array}$$

The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 2.   Issued Check No. 410 for $3,400 to Jay Bank to purchase U.S. savings bonds for employees.          2.   Issued Check No. 411 to Jay Bank for$27,046 in payment of $9,273 of social security tax,$2,318 of Medicare tax, and $15,455 of employees’ federal income tax due.       13.   Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

$$\begin{array}{lrr} \text{Salary distribution:}\\ \hspace{10pt}\text{Operations}&\$\hspace{5pt}43,200\\ \hspace{10pt}\text{Officers}&27,200\\ \hspace{10pt}\text{Office}&\underline{\hspace{15pt}6,800}&\$\hspace{5pt}77,200\\ \text{Deductions::}\\ \hspace{10pt}\text{Social security tax}&\$\hspace{5pt}4,632\\ \hspace{10pt}\text{Medicare tax}&1,158\\ \hspace{10pt}\text{Federal income tax withheld}&15,440\\ \hspace{10pt}\text{State income tax withheld}&3,474\\ \hspace{10pt}\text{Savings bond deductions}&1,700\\ \hspace{10pt}\text{Medical insurance deductions}&\underline{\hspace{15pt}4,500}&\underline{\hspace{10pt}30,904}\\ \text{Net amount}&&\underline{\underline{\$\hspace{5pt}46,296}}\\ \end{array}$$

Dec. 13.   Issued Check No. 420 in payment of the net amount of the biweekly payroll.         13.   Journalized the entry to record payroll taxes on employees’ earnings of December 13: social security tax, $4,632; Medicare tax,$1,158; state unemployment tax, $350; federal unemployment tax,$125.         16.   Issued Check No. 424 to Jay Bank for $27,020, in payment of$9,264 of social security tax, $2,316 of Medicare tax, and$15,440 of employees’ federal income tax due.         19.   Issued Check No. 429 to Sims-Walker Insurance Company for $31,500 in payment of the semiannual premium on the group medical insurance policy.         27.   Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

$$\begin{array}{lrr} \text{Salary distribution:}\\ \hspace{10pt}\text{Operations}&\$\hspace{5pt}42,800\\ \hspace{10pt}\text{Officers}&28,000\\ \hspace{10pt}\text{Office}&\underline{\hspace{15pt}7,000}&\$\hspace{5pt}77,800\\ \text{Deductions::}\\ \hspace{10pt}\text{Social security tax}&\$\hspace{5pt}4,668\\ \hspace{10pt}\text{Medicare tax}&1,167\\ \hspace{10pt}\text{Federal income tax withheld}&15,404\\ \hspace{10pt}\text{State income tax withheld}&3,501\\ \hspace{10pt}\text{Savings bond deductions}&\underline{\hspace{15pt}1,700}&\underline{\hspace{10pt}26,440}\\ \text{Net amount}&&\underline{\underline{\$\hspace{5pt}51,360}}\\ \end{array}$$

        27.   Issued Check No. 541 in payment of the net amount of the biweekly payroll.         27.   Journalized the entry to record payroll taxes on employees’ earnings of December 27: social security tax, $4,668; Medicare tax,$1,167; state unemployment tax, $225; federal unemployment tax,$75.         27.   Issued Check No. 543 for $20,884 to State Department of Revenue in payment of employees’ state income tax due on December 31.         31.   Issued Check No. 545 to Jay Bank for$3,400 to purchase U.S. savings bonds for employees.         31.   Paid $45,000 to the employee pension plan. The annual pension cost is$60,000. (Record both the payment and unfunded pension liability.)

Instructions

1. Journalize the transactions.
2. Journalize the following adjusting entries on December 31: a. Salaries accrued: operations salaries, $8,560; officers salaries,$5,600; office salaries, $1,400. The payroll taxes are immaterial and are not accrued. b. Vacation pay,$15,000.

The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:

$$\begin{array}{lrlr} 211 \text { Salaries Payable } & - & 218 \text { Retirement Savings } \\ 212 \text { Social Security Tax Payable } & \$ 9,273 & \quad \text { Deductions Payable } & \$ 3,400 \\ 213 \text { Medicare Tax Payable } & 2,318 & 219 \text { Medical Insurance Payable } & 27,000 \\ 214 \text { Employees Federal Income Tax Payable } & 15,455 & 411 \text { Operations Salaries Expense } & 950,000 \\ 215 \text { Employees State Income Tax Payable } & 13,909 & 511 \text { Officers Salaries Expense } & 600,000 \\ 216 \text { State Unemployment Tax Payable } & 1,400 & 512 \text { Office Salaries Expense } & 150,000 \\ 217 \text { Federal Unemployment Tax Payable } & 500 & 519 \text { Payroll Tax Expense } & 137,951 \end{array}$$

The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 2. Issued Check No. 410 for $3,400 to Jay Bank to invest in a retirement savings account for employees.

2.Issued Check No. 411 to Jay Bank for$27,046, in payment of $9,273 of social security tax,$2,318 of Medicare tax, and $15,455 of employees’ federal income tax due.

13.Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

$$\begin{aligned} &\text { Salary distribution: }\\ &\begin{array}{lrr} \quad \text { Operations } & \$ 43,200 & \\ \quad \text { Officers } & 27,200 & \\ \quad \text { Office } & \underline{6,800} & \$ 77,200 \\ \text { Deductions: } & & \\ \quad \text { Social security tax } & \$ 4,632 & \\ \quad \text { Medicare tax } & 1,158 & \\ \quad \text { Federal income tax withheld } & 15,440 & \\ \quad \text { State income tax withheld } & 3,474 & \\ \quad \text { Retirement savings deductions } & 1,700 & \\ \quad \text { Medical insurance deductions } & \underline{4,500} & \underline{\$ 30,904} \\ \text { Net amount } & & \underline{\underline{\$46,296}} \\ \end{array} \end{aligned}$$

Dec.13. Issued Check No. 420 in payment of the net amount of the biweekly payroll to fund the payroll bank account.

13. Journalized the entry to record payroll taxes on employees’ earnings of December 13: social security tax, $4,632; Medicare tax,$1,158; state unemployment tax, $350; federal unemployment tax,$125.

16.Issued Check No. 424 to Jay Bank for $27,020, in payment of$9,264 of social security tax, $2,316 of Medicare tax, and$15,440 of employees’ federal income tax due.

19.Issued Check No. 429 to Sims-Walker Insurance Company for $31,500, in payment of the semiannual premium on the group medical insurance policy.

27.Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:

$$\begin{aligned} &\text { Salary distribution: }\\ &\begin{array}{lrr} \quad \text { Operations } & \$ 42,800 & \\ \quad \text { Officers } & 28,000 & \\ \quad \text { Office } & \underline{7,000} & \$ 77,800 \\ \text { Deductions: } & & \\ \quad \text { Social security tax } & 4,668 & \\ \quad \text { Medicare tax } & 1,167 & \\ \quad \text { Federal income tax withheld } & 15,404 & \\ \quad \text { State income tax withheld } & 3,501 & \\ \quad \text { Retirement savings deductions } & \underline{1,700} & \underline{26,440} \\ \text { Net amount } & & \underline{\underline{\$ 51,360}} \\ \end{array} \end{aligned}$$

27.Issued Check No. 541 in payment of the net amount of the biweekly payroll to fund the payroll bank account.

27.Journalized the entry to record payroll taxes on employees’ earnings of December 27: social security tax, $4,668; Medicare tax,$1,167; state unemployment tax, $225; federal unemployment tax,$75.

27.Issued Check No. 543 for $20,884 to State Department of Revenue in payment of employees’ state income tax due on December 31.

31.Issued Check No. 545 to Jay Bank for$3,400 to invest in a retirement savings account for employees.

31.Paid $45,000 to the employee pension plan. The annual pension cost is$60,000. (Record both the payment and unfunded pension liability.)

Instructions

1. Journalize the transactions.
2. Journalize the following adjusting entries on December 31:

a. Salaries accrued: operations salaries, $8,560; officers salaries,$5,600; office salaries, $1,400. The payroll taxes are immaterial and are not accrued.

b. Vacation pay,$15,000.

Superior Cleaning Services, LLC, provides cleaning services for office buildings. The firm has 10 members in the LLC, which did not change between 2014 and 2015. During 2015, the business terminated two commercial contracts. The following revenue and employee information is provided:

b. Interpret the trend between the two years.

Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:

$$\begin{array}{llrr} \text { Employee } & \begin{array}{c} \text { Date First } \\ \text { Employed } \end{array} & \begin{array}{c} \text { Monthly } \\ \text { Salary } \end{array} & \begin{array}{c} \text { Monthly } \\ \text { Income Tax } \\ \text { Withheld } \end{array} \\ \hline \text { Arnett } & \text { Nov. } 16 & \$ 5,500 & \$ 944 \\ \text { Cruz } & \text { Jan. } 2 & 4,800 & 833 \\ \text { Edwards } & \text { Oct. } 1 & 8,000 & 1,592 \\ \text { Harvin } & \text { Dec. } 1 & 6,000 & 1,070 \\ \text { Nicks } & \text { Feb. } 1 & 10,000 & 2,350 \\ \text { Shiancoe } & \text { Mar. } 1 & 11,600 & 2,600 \\ \text { Ward } & \text { Nov. } 16 & 5,220 & 876 \end{array}$$

Instructions

1. Calculate the amounts to be reported on each employee’s Wage and Tax Statement for 20Y8, arranging the data in the following form:

$$\begin{array}{ccccc} \text { Employee } & \begin{array}{c} \text { Gross } \\ \text { Earnings } \end{array} & \begin{array}{c} \text { Federal Income } \\ \text { Tax Withheld } \end{array} & \begin{array}{c} \text { Social Security } \\ \text { Tax Withheld } \end{array} & \begin{array}{c} \text { Medicare } \\ \text { Tax Withheld } \end{array} \\ \hline \end{array}$$

2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.6% on the first$10,000 of each employee’s earnings; (e) total.

Superior Cleaning Services, LLC, provides cleaning services for office buildings. The firm has 10 members in the LLC, which did not change between 2014 and 2015. During 2015, the business terminated two commercial contracts. The following revenue and employee information is provided:

a. For 2015 and 2014, determine the revenue per employee (excluding members).

The following items were selected from among the transactions completed by Aston Martin Inc. during the current year:

Apr. 15. Borrowed $225,000 from Audi Company, issuing a 30-day, 6% note for that amount. May 1. Purchased equipment by issuing a$320,000, 180-day note to Spyder Manufacturing Co., which discounted the note at the rate of 6%. 15. Paid Audi Company the interest due on the note of April 15 and renewed the loan by issuing a new 60-day, 8% note for $225,000. (Record both the debit and credit to the notes payable account.) July 14. Paid Audi Company the amount due on the note of May 15. Aug. 16. Purchased merchandise on account from Exige Co.,$90,000, terms, n/30. Sept.15. Issued a 45-day, 6% note for $90,000 to Exige Co., on account. Oct. 28. Paid Spyder Manufacturing Co. the amount due on the note of May 1. 30. Paid Exige Co. the amount owed on the note of September 15. Nov. 16. Purchased store equipment from Gallardo Co. for$450,000, paying $50,000 and issuing a series of twenty 9% notes for$20,000 each, coming due at 30-day intervals. Dec. 16. Paid the amount due Gallardo Co. on the first note in the series issued on November 16. 28. Settled a personal injury lawsuit with a customer for $87,500, to be paid in January. Aston Martin Inc. accrued the loss in a litigation claims payable account.

Instructions

1. Journalize the transactions.
2. Journalize the adjusting entry for each of the following accrued expenses at the end of the current year: a. Product warranty cost,$26,800. b. Interest on the 19 remaining notes owed to Gallardo Co.

The accounting firm of Deloitte & Touche is the largest international accounting firm in the world as ranked by total revenues. For two recent years, Deloitte & Touche reported the following for its U.S. operations:

b. Interpret the trend between the two years.