Question
Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $75,600, $294,000, and $470,400, respectively. They predict annual partnership
Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $75,600, $294,000, and $470,400, respectively. They predict annual partnership net income of $498,000 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 $83,600 to Mo, $62,700 to Lu, and $94,500 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $498,000. Mo, Lu, and Barb withdraw $39,300, $53,300, and $69,300, respectively, at year-end. Also close the withdrawals accounts. Record the entry to close the income summary account assuming the partners agree to use plan(c) and net income is $498,000. Record the entry to close the partners' withdrawals accounts. (Mo, Lu, and Barb withdraw $39,300, $53,300, and $69,300, respectively, at year-end.)
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