Will Beck, Ron Beck, and Barb Beck formed the BBB Partnership by making capital contributions of $174,000, $124,286, and $198,857, respectively. They predict annual partnership net income of $245,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $35,000 to Will, $25,000 to Ron, and $40,000 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared equally.
1. Use the table to show how to distribute net income of $245,000 for the calendar year under each of the alternative plans being considered. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Totals may not tally due to rounding error. Omit the "$" sign in your response.)
Sharing Plan Will Ron Barb Total
(a) $ $ $ $
(b) $ $ $ $
(c) $ $ $ $
2. Prepare a statement of partners' equity showing the allocation of income to the partners assuming they agree to use plan (c), that income earned is $124,500, and that Will, Ron, and Barb withdraw $19,000, $26,000, and $36,000, respectively, at year-end. (Amounts to be deducted should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Round your intermediate calculations and final answers to the nearest dollar amount. Totals may not tally due to rounding error. Omit the "$" sign in your response.)
Statement of Partners' Equity
For Year Ended December 31
Will Ron Barb Total
$ $ $ $
Total net income
$ $ $ $
3. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $124,500 Also close the withdrawals accounts. (Round your intermediate calculations and final answers to the nearest whole dollar amount. Omit the "$" sign in your response.)
Date General Journal Debit Credit
Your tutorial is attached showing three sections, allocation of income under the three plans, ...
Your tutorial is attached showing three sections, allocation of income under the three plans, statement of changes in partner capital accounts, and journal entries to close income summary and the partner withdrawal accounts to partner capital accounts. Calculations are within the cells so click in the cell to see how to do this. This is now a template for other problems like this.