Betty Iris, Jim Dolan, and Bob Carrow formed the IDC Partnership by making capital contributions of \(\$ 245,000\), \(\$ 280,000\), and \(\$ 175,000\), respectively. They anticipate annual net incomes of \(\$ 390,000\) and are considering the following alternative plans of sharing net incomes and losses:

(a) equally;

(b) in the ratio of their initial investments; or

(c) interest allowances of \(12 \%\) on initial investments, salary allowances of \(\$ 95,000\) to Iris, \(\$ 46,000\) to Dolan, and \(\$ 60,000\) to Carrow, with any remaining balance shared equally.

\section*{Required}

1. Prepare a schedule with the following column headings:

Use the schedule to show how a net income of \(\$ 390,000\) would be distributed under each of the alternative plans being considered. Round your answers to the nearest whole dollar.
2. Prepare the December 31 journal entry to close the Income Summary account assuming they agree to use alternative

(c) and the net income is \(\$ 135,000\). (Show your supporting calculations.)

Transcribed Image Text:

Income/Loss Share Share Share Sharing to to to Plan Calculations Iris Dolan Carrow Income Allocated