Problem D-2A Allocating partnership income and loss; sequential years LO P2 rene 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 $28,000 for Watts and $52,000 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, $14,000 net loss: year 2, $35,000 net income and year 3, $58,333 net income. 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 os positive values. Enter losses os negative values. Do not round intermediate colculations. Round final answer to the nearest whole dollor.) Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 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. ear Plan (a) Net Income (loss) Balance allocated in proportion to Watts Lyon Total S (14,000) initial investments Balance of income (loss) Shares to the partners Plan (b) Net Income (loss) Balance allocated in proportion to Watts Lyon Total $ (14,000) 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 Watts Lyon Total S (14,000) initial investments Balance of income (loss) Shares of the partners Salary allowances Balance of income (loss) Balance allocated in proportion to nitial 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 partnens Watts Lyon Total S (14,000) Year Year 2> Year 1 Year 2 Year 3 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 ear Plan (a Net Income (loss) Balance allocated in proportion to Watts Lyon Total S 35,000 initial investments Balance of income (loss) Shares to the partnens Plan (b) Net Income (loss) Balance allocated in proportion to Watts Total $ 35,000 time devoted Balance of income (loss) Shares to the partners Plan Net Income (loss) Salary allowances Balance of income (loss) Watts Total $ 35,000 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 Watts Lyon Total $ 35,000 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 Lyon Total $ 35,000 Watts Lyon Total Net Income (loss) Salary allowances Balance of income (loss) Balance allocated in proportion to S 58,333 initial investments Balance of income (loss) Shares of the partners Watts Lyon Total $ 58,333 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
