Question

Problem 12-4A Partnership income allocation, statement of partners' equity, and closing entries P2e Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions 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 (e) 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 balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb. Required 1. Prepare a table with the following column headings. Income (Loss) Sharing Plan Calculations Mo Lu Barb Total Use the table to show how to distribute net income of $450.000 for the calendar year under each of the alternative plans being considered. (Round answers to the nearest whole dollar.) 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 $209.000, and that Mo, Lu, and Barb withdraw $34,000, $48,000, and S64.000, respectively, at year-end. Check (2) Barb. Erlding Captal, $449.600 3. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is S209.000. Also close the withdrawals accounts.

Answer 1

DATE: DD Entry to clase income statement Mos capital account a - To PSL ak 101050 loloso no 262350 262350 - Luis capital account To Palak Barb Capital account Dr 449600 449600 - To Palale Entry for with abrawal Mos hus - Borb habital account capital account capital account To Bank Dr Di nr 34000 48000 64000 146000