Problem 12-3A (Algo) Allocating partnership income LO P2

Ries, Bax, and Thomas invested $28,000, $44,000, and $52,000, respectively, in a partnership. During its first calendar year, the firm earned $387,900.

Required:

Prepare the entry to close the firms Income Summary account as of its December 31 year-end and to allocate the $387,900 net income under each of the following separate assumptions.

Part 1

1. The partners did not agree on a plan, and therefore share income equally.

Part 2

2. The partners agreed to share income and loss in the ratio of their beginning capital investments.

Part 3

3. The partners agreed to share income and loss by providing annual salary allowances of $38,000 to Ries, $33,000 to Bax, and $45,000 to Thomas; granting 10% interest on the partners beginning capital investments; and sharing the remainder equally.