Watts and Lyon are forming a partnership. Watts invests $28,000 and Lyon invests $42,000. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $18,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $18,000 per year to Lyon, 9% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $16,000 net loss; Year 2, $40,000 net income; and Year 3, $66,667 net income.

Question 2.

Ries, Bax, and Thomas invested $80,000, $112,000, and $128,000, respectively, in a partnership. During its first calendar year, the firm earned $249,000.

Complete this question by entering your answers in the tabs below. 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. 2. The partners agreed to share income and loss in the ratio of their beginning capital investments. Complete this question by entering your answers in the tabs below. Prepare the entry to close the firm's Income Summary account as of its December 31 year-end. Note: Do not round intermediate calculations. Journal entry worksheet Record the entry to close the income summary account assuming the partners have agreed to share income and loss in the ratio of their beginning capital investments. Note: Enter debits before credits