7. Problem 12-2A (Algo) Allocating partnership income and loss; sequential years LO P2 ok nt nces Watts and Lyon are forming a partnership. Watts invests $36,000 and Lyon invests $54,000. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $21,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $21,000 per year to Lyon, 9% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $20,000 net loss; Year 2, $50,000 net income; and Year 3, $83,334 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partriers under each of the four plans being considered. Note: Enter all allowances as positive values. Enter losses and capital deficits, if any, as negative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar. Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 Camalate the tshine ana far asch of the firet thran unsre ku chausinn how to allersta natarchin inanma ar iner ta tha 4 of 4 < Prey Next Check my we Year 1 Plan (a) Watts Net Income (loss) Balance allocated in proportion to 36,000/90,000 (5,600) 54,000/90,000 initial investments Balance of income (loss) Shares to the partners Book Plan (b) $ (5,600) Watts rint Net Income (loss) rences time devoted Balance allocated in proportion to Balance of income (loss) Shares to the partners Plan (c) Net Income (loss) Salary allowances Balance of income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners Lyon Total $ (20,000) (8,400) (14,000) $ (6,000) (8,400) $ (14,000) $ Lyon Total $ (20,000) + 0 $ Total 0 $ (20,000) $ 0 $ Watts Lyon wwwwww 0 0 $ 0 0 0 $ 0 Plan (c) Net Income (loss) Salary allowances Balance of income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners Plan (d) Net Income (loss) Salary allowances Balance of income (loss) Interest allowances Balance of income (loss) Watts Lyon $ 0 Watts 14 $ Total $ (20,000) 0 0 $ 0 0 $ 0 Lyon Total $ (20,000) 0 + 0 Balance allocated equally Balance of income (loss) Shares to the partners 0 0 0 $ 0 $ 0