Irene Watts and John Lyon are forming a partnership to which Watts will devote one fourth time and Lyon will devote full time. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments, which they have agreed will be $32,000 for Watts and $48,000 for Lyon: (b) in proportion to the time devoted to the business: (C) a salary allowance of $1.250 per month to Lyon and the balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $1.250 per month to Lyon, 9% interest on their initial capital investments, and the 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. ces Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of the four plans being considered. (Enter all allowances as positive values. Enter losses as negative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar.) Year 1 Watts Lyon Total (20,000) $ (20,000) $ $ 0 Plan (a) Net Income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners Plan (b) Net Income (loss) Balance allocated in proportion to time devoted Balance of income (loss) Sharos to the partners Lyon Total Watts $ (20,000) al $ 0 Draw 5 of 5 E! Next Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners $ (20,000) Plan (b) Watts Lyon Total (20,000) $ Sol Watts Lyon Total (20,000) $ Net Income (loss) Balance allocated in proportion to time devoted Balance of income (loss) ome (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 of the partners Plan (d) Net Income (loss) Salary allowances Balance of income (loss) Interest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares of the partners $ ol 0 $ Watts Lyon Total (20,000) $ Watts Lyon Total 50,000 $ Year 2 Plan (a) Net Income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners 50 000 $ $ 0 ook Plan (b) Watts Lyon Total 50,000 Tint $ rences OS Watts Lyon Total $ 50,000 Net Income (loss) Balance allocated in proportion to time devoted 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 of the partners Plan (d) Net Income (loss) Salary allowancos Balance of income (loss) Interest allowances 50,000 $ $ 0 Watts Lyon Total $ 50,000 Prav 5 of 5 !! 112 Assignment 1 DURRE ALTO 5 Watts Lyon Total 50,000 Shares of the partners Plan (d) Net Income (loss) Salary allowances Balance of income (loss) Interest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares of the partners aces Watts Lyon Total $ 83,334 83,334 Year 3 Plan (a) Net Income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners Plan (b) Net Income (loss) Balance allocated in proportion to time devoted Ralance of income lineel Watts Lyon $ 83,334 Cuple 12 Assignment i Year 3 Plan (a) Watts Lyon Total $ 83 334 points 0 $ $ 83 334 0 Total 83.334 Watts eBook Lyon $ Print References $ 0 $ 0 $ Lyon Net Income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners Plan (b) Net Income (loss) Balance allocated in proportion to time devoted 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 of the partners Plan (d) Net Income (loss) Salary allowances Balance of income (loss) Interest allowances 0 Total 83,334 $ $ $ 0 Watts Lyon Total 83 334 S Watts Lyon Total 83,334 $ / / / 1 7 / / / 1 / / / / 1 / / ok / / / 0 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 of the partners Plan (d) Net Income (loss) Salary allowances Balance of income (loss) Interest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares of the partners $ Watts ences Lyon Total 83,334 $ $ 0 0 $ 0 5 of 5
