Question

[The following information applies to the questionsdisplayed below.]

Bill Beck, Bruce Beck, and Barb Beck formed the BBB Partnershipby making capital contributions of $81,900, $318,500, and $509,600,respectively. They predict annual partnership net income of$534,000 and are considering the following alternative plans ofsharing income and loss: (a) equally; (b) in the ratio of theirinitial capital investments; or (c) salary allowances of $86,400 toBill, $64,800 to Bruce, and $98,000 to Barb; interest allowances of10% on their initial capital investments; and the balance shared asfollows: 20% to Bill, 40% to Bruce, and 40% to Barb.

Income (Loss) Sharing Plan

Plan (a)BillBruceBarbTotalNet Income (loss)$534,000Balanceallocated equallyBalance of income (loss)$0Shares to thepartners$178,000$178,000$178,000$534,000

Plan (b)BillBruceBarbTotalNet Income (loss)$534,000Balanceallocated in proportion to initial investments0Balance of income(loss)$534,000Shares to the partners$0$0$0$0

Plan (c)BillBruceBarbTotalNet income (loss)$534,000Salaryallowances0Balance of income (loss)Interest allowances0Balance ofincome (loss)Balance allocated0Balance of income (loss)$0Shares ofthe partners$0$0$0$0

2.

Prepare a statement of partners’ equity showing the allocationof income to the partners assuming they agree to use plan (c), thatincome earned is $236,200, and that Bill, Bruce, and Barb withdraw$43,600, $57,600, and $73,600, respectively, at year-end.(Do not round intermediate calculations. Enter allallowances as positive values. Enter losses as negativevalues.)

BBB PARTNERSHIP

Statement of Partners’ Equity

For Year Ended December 31

BillBruceBarbTotal

Initialpartnership investments0

Netincome

Total netincome0

Total0000

0

$0$0$0$0

3.

Prepare the December 31 journal entry to close Income Summaryassuming they agree to use plan (c) and that net income is$236,200. Also close the withdrawals accounts.

a

Record the entry to close the income summary account assumingthe partners agree to use plan(c) and net income is $236,200.

b

Record the entry to close the partners’ withdrawals accounts.(Bill, Bruce, and Barb withdraw $43,600, $57,600, and $73,600,respectively, at year-end.)

 

 

 

 

 



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