Question

P12.6A (LO 3, 4) AP Tyler Gilligan and Matt Melnyk, two college friends, decided to set up a snow removal business called Ty & Matt Snow Removal Services. At the inception of the partnership, Tyler invested $4,000 cash and Matt invested $11,000 cash. Once formed, early in January the partnership purchased equipment and a vehicle. Tyler estimates that the equipment purchased for $2,000 and the vehicle purchased for $10,000 have five-year useful lives, with no residual value. He used the straight-line method to calculate depreciation expense. At the end of the first year of business, Tyler, who was studying accounting, provided the following information: Prepare entries to correct errors, allocate profit, and prepare financial statements. TY & MATT SNOW REMOVAL SERVICES Income Statement Year Ended December 31, 2021 $50,000 Service revenue Expenses Supplies expense $ 6,000 Depreciation expense Salaries expense 2,400 38,400 30,000 Profit S11,600 Additional information: 1. Salaries expense is $20,000 and $10,000 cash that was paid to Tyler and Matt, respectively, during the year. 2. All revenues were collected in cash. 3. All supplies were paid for in cash. At the end of the year, there were no supplies on hand. 4. There is $17,000 in the bank account at December 31, 2021. Instructions a. Prepare journal entries to correct the errors, if any, on the income statement. b. Calculate the correct profit and the amount to be allocated to each partner. c. Prepare a statement of partners' equity for the year ended December 31, 2021. d. Prepare a balance sheet December 31, 2021. Taking It Further Tyler is not happy about how the profit was allocated. He says that he works twice as hard as Matt. Matt argues that he made a larger contribution to start the partnership. What should Tyler and Matt do to deal with their concerns?

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o correclod Dale/ Sno Journal Entries Accounts Title Debit Coodit 10000 Salary payable (30000 - 2000 10000 To salary expense (To record silvessal of excess salary expense Grecognised Tyler Griligan Capital malt Molnyk Capital - To cast (10odox 1) "(to payment to partness Po caso ) 1 2 ou Giligar toooox 10000 & Calculation of correct profit SOOOO Service Revenue Expenses Supplies expense 1 Depreciation Salaries expensee - Profit 6000 2400 | 20000 (88400) 1 20600

3 Preparation of statement of partour's equity Tyler Güligan matt capital Melnyk cap Capital invested : 4000 11000 Lees. Daawing = 10000 Femoro69667 67333) DISA'4:11) Add Profit 9 satio of till (1600x45 1857600 (21600 x 15) Ending balance 993 7093 19507 15840 Balance sheet on bec 31,202) Droit Liabilities are Assets Current Assets Banks Peso Partner's Capital Tyler 7093 Property, plant & equipment math 19507 Equipment = 2000 Vehicle = 10000 Less: dep = (2400 9600 26600 26600