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Problem 12-4A Partnership income allocation, statement of partners' equity, and closing entries LO P2

Mo, Lu, and Barb formed the MLB Partnership by making investments of $67,500, $262,500, and $420,000, respectively. They predict annual partnership net income of $450,000 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 $80,000 to Mo, $60,000 to Lu, and $90,000 to Barb; interest allowances of 10% on their initial capital investments; and the remaining balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb.

Problem 12-4A Part 1

Required: 1. Use the table to show how to distribute net income of $450,000 for the calendar year under each of the alternative plans being

		Income (Loss) Sharing Plan
Plan (a)		Mo		Lu		Barb	Total
Net Income (loss)							$450,000
Balance allocated equally	1/3	$150,000	1/3	$150,000		$150,000	450,000
Balance of income (loss)							$0
Shares to the partners		$150,000		$150,000		$150,000	$450,000
Plan (b)		Mo		Lu		Barb	Total
Net Income (loss)							$450,000
Balance allocated in proportion to initial investments	1/2	$45,000	1/3	$45,000		$45,000	135,000
Balance of income (loss)							$315,000
Shares to the partners		$45,000		$45,000		$45,000	$135,000
Plan (c)		Mo		Lu		Barb	Total
Net income (loss)							$450,000
Salary allowances							0
Balance of income (loss)
Interest allowances							0
Balance of income (loss)
Balance allocated							0
Balance of income (loss)							$0
Shares of the partners		$0		$0		$0	$0