Lancaster and Reed are partners in a successful sporting goods store. Their profit and losssharing agreement stipulates that interest of 10% is to be allowed on beginning capitalbalances, that annual salaries of $40,000 to Lancaster and $29,000 to Reed are to be paid,and that any remaining profit or loss is to be shared 2:1 between Lancaster and Reed.The January 1, Year 5, condensed balance sheet is shown below:LANCASTER AND REEDBALANCE SHEETJanuary 1, Year 5AssetsCash $ 10,000Inventory 475,000Office equipment - net 25,000Other assets 5,000$515,000LiabilitiesAccounts payable $211,000Sales tax payable 9,000$220,000Partners' equityLancaster $190,000Reed 105,000$295,000$515,000During Year 5, the partnership earned $130,000 before partners' salary and interest,and Lancaster and Reed had drawings of $50,000 and $60,000 respectively. On January 1, Year 6, the partnership decided to admit Jackson as a partner with a25% interest in the partnership for a cash contribution of $125,000. The bonus methodwas used to admit Jackson.The profit and loss sharing agreement was amended as follows:

• Interest of 12% on beginning capital.
• Annual salaries of $40,000 to Lancaster and $31,200 to Reed.
• Remaining profit or loss to be shared in a 2:1:1 ratio by Lancaster, Reed, andJackson.The partnership reported profit before partners' interest and salary of $180,000 inYear 6, and each partner withdrew $50,000.

Required:

Prepare, in good form, a statement of changes in partners' capital accounts from January1, Year 5, to December 31, Year 6. Show your calculations.