Irene Watts and John Lyon are forming a partnership to which Watts will devote one-half 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 $24,500 for Watts and $45,500 for Lyon; (b) in proportion to the time devoted to the business; (c) a salary allowance of $1,500 per month to Lyon and the balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $1,500 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, $19,000 net loss; year 2, $47,500 net income; and year 3, $79,167 net income.

( PLEASE IGNORE THE BOTTOM QUESTION IM LOOKING FOR THE TOP SOLUTION USING THE BOTTOM CHART )