Problem 12-3A Part 1

Problem 12-3A Partnership income allocation, statement of partners' equity, and closing entries LO P2

[The following information applies to the questions displayed below.]

Bill Beck, Bruce Beck, and Barb Beck formed the BBB Partnership by making capital contributions of $76,500, $297,500, and $476,000, respectively. They predict annual partnership net income of $502,500 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 $84,000 to Bill, $63,000 to Bruce, and $95,000 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Bill, 40% to Bruce, and 40% to Barb. Bill, Bruce, and Barb withdraw $40,000, $54,000, and $70,000, respectively, at year-end.

Problem 12-3A Part 1

Required:
1.	Use the table to show how to distribute net income of $502,500 for the calendar year under each of the alternative plans being considered.(Do not round intermediate calculations.)

Problem 12-3A Part 2

2.	Prepare a statement of partners' equity showing the allocation of income to the partners assuming they agree to use plan (c), that income earned is $226,000, and that Bill, Bruce, and Barb withdraw $40,000, $54,000, and $70,000, respectively, at year-end.(Do not round intermediate calculations.)

Problem 12-3A Part 3

3.

Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $226,000. Also close the withdrawals accounts.