[adorameamor]

I have been rattling my brain with this one, I am not getting it, can anyone help?

-Z Manufacturing Company is a partnership among yolanda gonzales, willie todd and linda yeager. The partnership contract states that partnership profits will be split equally among the three partners. During the current year gonzales withdrew $25,000, todd withdrew $23,000, and yeager withdrew $30,000. Net income of e-z manufacturing company amounted to $180,000.

a. calculate each partner's share of net income for the period.

b. describe the effects, if any, that the partnership operations would hae on the individual tax returns of the partners.

c. prepare a statement of partner's equity for the year. Assume that partner's capital accounts had a beginning balances of $50,000, $60,000 and $40,000 for gonzales, todd and yeager, respectively. Hide problem

[morgaine300]

Pretty long for all at once. As for the first question, note it says the contract states the income is to be shared equally among the parters. You have $180,000 of net income, and how many partners? So how would you split it up equally?

Second question actually just requires knowing the answer. There's nothing to calculate once the first part is done. This is what we call "flow through" income. i.e. the company itself is not taxed (though a return is filed). Instead, the net income that has been applied to each partner is counted as income on their personal taxes. It's considered theirs, whether or not they actually withdraw any of it. Think of it like interest you get on a bank account. You have to count that as income on your taxes, whether you leave it in the bank, or whether you withdraw it out. Because it's still your income. Same type of thing.

As for the third question. You have the beginning balances. What will net income do to a capital balance? What will a withdrawal do to it?

Take another crack at it. If you show any work you've actually done then someone can take a look at it and maybe tell you where you're going wrong.

[adorameamor]

:confused: Thank you so much for responding and I apologize, I thought I has pasted my work (working midnights is killing me, lol) here is what I got so far and I just don't think I'm getting it. Any help is greatly appreciated:

a.
Gonzales Todd Yeager Total
Net Income to be divided $180,000
Less: Drawing 25000 23000 30000= 78000
$102,000

Allocated in fixed ratio (33.3%): 34000 34000 34000= 102000
$68,000 $68,000 $68,000 = $(102,000)



b.
Gonzales Todd Yeager Total
Balance for Jan. 2008 $50,000 $60,000 $40,000 = $150,000
Net Income for the year 30000 30000 30000 = 90000
subtotals: $80,000 $90,000 $70,000 = $240,000

Less: Drawings 25000 23000 30000 = 78000
Balance for Dec. 2008 $55,000 $67,000 $40,000 = $162,000

[morgaine300]

Ah, I see where you're confused. You're taking the drawings out first.

The net income division is not related to drawings. It doesn't say to divide up what is left over after drawings are removed. You're dividing up just the net income equally. This gets applied to their accounts first. Then subtract out their drawings. What you have for the third part is the correct idea if you get the income division straightened out.

Make sense?

[adorameamor]

Ah, OK I think I got it, please let me know if this is right:
a.
Division of Partnership Net Income
Gonzales Todd Yeager Total
Net Income to be divided……….. $180,000


Allocated in fixed ratio (33.3%): 60,000 60,000 60,000 180,000
Total Share to each partner……. $60,000 $60,000 $60,000 $-

Gonzales Todd Yeager Total
Balance for Jan. 2008 $50,000 $60,000 $40,000 $150,000
Net Income for the year 60,000 60,000 60,000 180,000
Subtotals: $110,000 $120,000 $100,000 $330,000
Less: Drawings 25,000 23,000 30,000 78,000
Balance for Dec. 2008 $85,000 $97,000 $70,000 $252,000

[morgaine300]

Yup, you got it. :-)

[adorameamor]

:D Thank you sooooo much for your help, you were great, made me think;) , thanks again!!