Question

Ben Conway, Ida Chan, and Clair Scott formed CCS Consulting by making capital contributions of $252,000, $288,000, and $182,000, respectively. They anticipate annual profit of $433,200 and are considering the following alternative plans of sharing profits and losses: a. Equally; b. In the ratio of their initial investments, or c. Salary allowances of $112,000 to Conway, $89,000 to Chan, and $64,000 to Scott and interest allowances of 10% on initial investments, with any remaining balance shared equally. Required: 1. Use the schedule to show how a profit of $433,200 would be distributed under each of the alternative plans being considered. (Enter all amounts as positive values.) Profit (Loss) Sharing Plan Calculations Share to Conway Share to Chan Share to Scott Total $ 0 (b) (c) $ 433,200 Profit Profit Profit Salary allowances Interest allowances Total salaries and interest allocation Balance of Profit Balance allocated equally Balance of Profit Shares of partners s 0 % 0 % 0 % 0 $ 433,200 $ 433,200 $ 0 $ 0 $ 0 $ 0

Answer 1

Solution o Scherdele showing how to a profit of $ 4.33. 200 would be distribuko Under each of the alternative Plans being considered. Profit Closs) Total Share Shan to Share to chan to Particolars - Sharing Plan Conway scott Pran - (a) 4,33,200 Met income Closs) 1.04.400 1,44,400 1,44,400 4.33,200 Balance allocated equally (4.33,200) Balance of income shares to Parther's 1,44.000 1,44,400 1,4914 00 4.33.200 4.33.200 i Plan-(e) et income Closs) Initial investment 2,52.000 Balance allocated in 1,51,200 a Propantion to initial Investment 288,000 1.92000 7.22,000 1,72,800 1,04,200 4.33,200 4.33.200 x2.52.00 4,33,200 1,82,000 7.22.000 122.000 4,33,200x288,000 722.000 O Balance of income closs) 4,33200 Share to VWtheis

Plan-c net income 4.31.200 closs) Initial investment 2.52.000 2.88,000 1,82,000 7,122.000 salary allowance 1,12.000 89.000 64.000 2.65.000 Balance of income 1,68.200 Interest allowance 25,900 28,800 18,200 f2.800 (9.54.000 x \"%) 0,88.000X10%.) (1882,1000X10%) Balanceal income 96.000 Balance allocated 32.000 32.000 32.000 96.000 (26,60) 26,00) (960) Balance of income 1169,200 1,49800 1:14,200 4,33,200 shares to the Parther's

@ statement of Changes in eauity showing the allocation af Profit to the Parthers. assuming they agree to use alternative (c) and the Profit actually earned for the year ended December 31,00do is $4,33,200 ces consulting statement of changes in equity for year ended December 31,2020 conway chan scott Total enitial investment 2,52,000 2,88,000 1,82,000 7,22.00 net income salary allowance 1.19.000 89,000 64,000 265,000, Sainterest allowance 95.200 28,800 18,200 72,200 Balance allocato 32,000 321000 32,000 96,000 Total net income 7,69,200 149,800 1,14,200 4.33,200 less's with draw (44,000) (34,000) Qu, 000)(1,09,000) 125,200 1,15,800 90,200 closing Balance 3,77,200 4,03,800 .72.200 3900 10.53.900

income sommary Amount (S) Amountio 4,33,200 ③ Journal entry to clore Date Particulars Dec-31 Income Summary conway chan scott (Fon Income closed to accounts) 1.69,200 1,49,800 114.200 Capital

24,000 Dec-31 Conway capital 44,000 chan capital 34,000 scoft capital Conway withdrawal chan withdrawal scoff withdrawal C far withdrawals Closed) 44,000 34,000 24,000
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