Watts and Lyon are forming a partnership. Watts invests $28,000 and Lyon invests $52,000. 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, 11% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $17,000 net loss; Year 2, $42,500 net income; and Year 3, $70,833 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 as positive values. Enter losses and capital deficits, if any, as negative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar.)
Watts and Lyon are forming a partnership. Watts invests $28,000 and Lyon invests $52,000. The partners agree that Watts will wo one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alterna 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, 11% Interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $17.000 net loss, Year 2. $42,50 net income, and Year 3. $70,833 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 partnersu each of the four plans being considered. (Enter all allowances as positive values. Enter losses and capital deficits, if any, as negative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar) Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 Complete the tables, one cor 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. Watts Lyon Year 1 Plan (a) Net Income (loss) Total $ (17.000) Balance allocated in proportion to 14 o T Ich 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. Watts Lyon Total $ (17,000) 0 S (17,000) $ 0 $ 0 $ 0 Watts Lyon Total $ (17,000) Year 1 Plan (a) Net Income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners Plan (b) Net Income (loss) Balance allocated in proportion to 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 initial investments 0 $ $ 0 $ 0 Watts Lyon Total $ (17000) 0 0 0 $ ols 0 $ 0 $ Balance of income (loss) Shares to the partners Plan (d) oma flores Watts Lyon Total $ (17.000) S 0 $ 0 $ 0 Watts Lyon Total $ (17,000) 0 0 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 nitial investments Balance of income (loss) Shares to the partners Plan (d) Vet Income (loss) Salary allowances Balance of income (loss) nterest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares to the partners $ $ 0 $ olo 0 Watts Lyon Total $ (17,000) 0 0 0 S 0 $ 0 0 $ 0 $ Year Year 2 > Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss t partners under each of the four plans being considered. Watts Lyon Total 42,500 $ 0 $ $ 0 42,500 0 $ 0 $ Watts Lyon Total 42,500 $ Year 2 Plan (a) Net Income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to the partners Plan (b) Net Income (loss) Balance allocated in proportion to 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 initial investments Balance of income (loss) Shares to the partners 0 $ 0 0 $ 0 Watts Lyon Total $ 42,500 0 0 $ 42,500 0 $ 0 $ 0 S TA 0 $ 0 $ Watts Lyon Total $ 42,500 0 0 $ Partier Plan (c) Net Income (loss) Salary allowances Balance of income (loss) Balance allocated in proportion to initial investments Balance of income (loss) Shares to 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 to the partners $ 0 $ 0 $ Watts Lyon 42,500 0 Total 42,500 0 $ 0 0 $ 0 $ 0 $ 0 $ 0
