Questions: For Sheridan Co., beginning capital balances on January 1, 2022, are Nancy Payne 24,000 and Ann Dody 20,300. During the year, drawings were Payne 8,400 and Dody 4,700. Net income was 25,700, and the partners share income equally. Prepare the partners' capital statement for the year. (List items that increase partners' capital first.) Prepare the owners' equity section of the balance sheet at December 31, 2022.

For Sheridan Co., beginning capital balances on January 1, 2022, are Nancy Payne 24,000 and Ann Dody 20,300. During the year, drawings were Payne 8,400 and Dody 4,700. Net income was 25,700, and the partners share income equally. Prepare the partners' capital statement for the year. (List items that increase partners' capital first.) Prepare the owners' equity section of the balance sheet at December 31, 2022.
Transcript text: For Sheridan Co., beginning capital balances on January 1, 2022, are Nancy Payne $24,000 and Ann Dody $20,300. During the year, drawings were Payne $8,400 and Dody $4,700. Net income was $25,700, and the partners share income equally. Prepare the partners' capital statement for the year. (List items that increase partners' capital first.) Prepare the owners' equity section of the balance sheet at December 31, 2022.
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Solution

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Let's address the given questions step by step.

(a) Prepare the partners' capital statement for the year.

To prepare the partners' capital statement, we need to account for the beginning capital balances, the drawings, and the net income shared equally between the partners.

  1. Beginning Capital Balances:

    • Nancy Payne: \$24,000
    • Ann Dody: \$20,300

  2. Drawings:

    • Nancy Payne: \$8,400
    • Ann Dody: \$4,700

  3. Net Income:

    • Total Net Income: \$25,700
    • Shared equally: \$25,700 / 2 = \$12,850 each

Now, let's calculate the ending capital balances for each partner.

Nancy Payne:

  • Beginning Capital: \$24,000
  • Add: Share of Net Income: \$12,850
  • Less: Drawings: \$8,400
  • Ending Capital: \$24,000 + \$12,850 - \$8,400 = \$28,450

Ann Dody:

  • Beginning Capital: \$20,300
  • Add: Share of Net Income: \$12,850
  • Less: Drawings: \$4,700
  • Ending Capital: \$20,300 + \$12,850 - \$4,700 = \$28,450

Partners' Capital Statement:

SHERIDAN CO.
Partners' Capital Statement
For the Year Ended December 31, 2022

                        Nancy Payne    Ann Dody
Beginning Capital       $24,000        $20,300
Add: Net Income         $12,850        $12,850
                        --------------------------------
                        $36,850        $33,150
Less: Drawings          $8,400         $4,700
                        --------------------------------
Ending Capital          $28,450        $28,450
(b) Prepare the owners' equity section of the balance sheet at December 31, 2022.

The owners' equity section of the balance sheet will include the ending capital balances of both partners.

SHERIDAN CO. Partial Balance Sheet December 31, 2022

Owners' Equity:
  Nancy Payne, Capital    $28,450
  Ann Dody, Capital       $28,450
                          ----------------
  Total Owners' Equity    $56,900
Summary
  • The partners' capital statement shows the beginning capital, additions from net income, and subtractions from drawings, resulting in the ending capital balances for each partner.
  • The owners' equity section of the balance sheet at December 31, 2022, reflects the ending capital balances of both partners, summing up to a total owners' equity of \$56,900.
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