Problem 124A Partnership income allocation statement of part

Problem 12-4A Partnership income allocation, statement of partners\' equity, and closing entries LO P2 [The following information applies to the questions displayed below.] Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $72,900, $283,500, and $453,600, respectively. They predict annual partnership net income of $481,500 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $82,400 to Mo, $61,800 to Lu, and $93,000 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. 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 $481,500, and that Mo, Lu, and Barb withdraw $37,600, $51,600, and $67,600, respectively, at year-end. (Do not round intermediate calculations. Enter all allowances as positive values. Enter losses as negative values.) MLB PARTNERSHIP Statement of Partners\' Equity For Year Ended December 31 Mo Lu Barb Total Initial partnership investments 0 Net income Total net income 0 Total 0 0 0 0 0 $0 $0 $0 $0

Solution

Statement of Partners’ Equity

Mo Meek

Lu Ling

Barb Beck

Total

Initial investment

$72900

$283500

$453600

$810000

Net income;

+ Salary allowances

$82400

$61800

$93000

$237200

+ Interest allowances (10%)

$7290

$28350

$45360

$81000

+ Balance allocated (2:4:4)

$32660

$65320

$65320

$163300

Total net income

$122350

$155470

$203680

$481500

Less: Withdrawals

($37600)

($51600)

($67600)

($156800)

Ending capital balances

$157650

$387370

$589680

$1134700