Homework SourseBill Beck Bruce Beck and Barb Beck formed the BBB Partnershi
Bill Beck, Bruce Beck, and Barb Beck formed the BBB Partnership by making capital contributions of $79,200, $308,000, and $492,800, respectively. They predict annual partnership net income of $519,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $85,200 to Bill, $63,900 to Bruce, and $96,500 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Bill, 40% to Bruce, and 40% to Barb. Bill, Bruce, and Barb withdraw $41,700, $55,700, and $71,700, respectively, at year-end.
Use the table to show how to distribute net income of $519,000 for the calendar year under each of the alternative plans being considered. (Do not round intermediate calculations.)
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 $231,100, and that Bill, Bruce, and Barb withdraw $41,700, $55,700, and $71,700, respectively, at year-end. (Do not round intermediate calculations. Enter all allowances as positive values. Enter losses as negative values.)
Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $231,100. Also close the withdrawals accounts.
| Bill Beck, Bruce Beck, and Barb Beck formed the BBB Partnership by making capital contributions of $79,200, $308,000, and $492,800, respectively. They predict annual partnership net income of $519,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $85,200 to Bill, $63,900 to Bruce, and $96,500 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Bill, 40% to Bruce, and 40% to Barb. Bill, Bruce, and Barb withdraw $41,700, $55,700, and $71,700, respectively, at year-end.
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Solution
Part 1
workings
Part 2
| Bill Beck | Bruce Beck | Barb Beck | Total | |
| Plan A | ||||
| Net Income (loss) | 519,000.00 | |||
| Balance allocated equally | 173,000.00 | 173,000.00 | 173,000.00 | (519,000.00) |
| Balance of income (loss) | - | |||
| Shares to the partners | 173,000.00 | 173,000.00 | 173,000.00 | (519,000.00) |
| Plan B | ||||
| Net Income (loss) | 519,000.00 | |||
| Balance allocated in proportion to initial investment (9%,35%,56%) | 46,710.00 | 181,650.00 | 290,640.00 | (519,000.00) |
| Balance of income (loss) | - | |||
| Shares to the partners | 46,710.00 | 181,650.00 | 290,640.00 | (519,000.00) |
| Plan C | ||||
| Net Income (loss) | 519,000.00 | |||
| Salary allowances | 82,500.00 | 63,900.00 | 96,500.00 | (242,900.00) |
| Balance of income (loss) | 276,100.00 | |||
| Interest allowances | 7,920.00 | 30,800.00 | 49,280.00 | (88,000.00) |
| Balance of income (loss) | 188,100.00 | |||
| Balance allocated 20% ,40% 40% | 37,620.00 | 75,240.00 | 75,240.00 | (188,100.00) |
| Balance of income (loss) | - | |||
| Shares to the partners | 128,040.00 | 169,940.00 | 221,020.00 |
