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newconnectmheducation.com/flow/connecthtml 顛☆ pter 12 Partnership Income or Loss G Saved Help Save & Exi 3 Chec Problem 12-2A Allocating partnership income and loss; sequential years LO P2 and John Lyon are forming a partnership to which Wtts will devote one-fourth time and Lyon will devote full time. They discussed the followin g alternative plans for sharing income and loss: in the ratio of their initial capital investments, which they ts for Watts and $63,000 for Lyon; (b) in proportion to the time devoted to the business, (c a salary per month to Lyon and the balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $1,750 per month to Lyon, 12% interest on their initial capital investments, and the balance shared equally. The partners expect the business to perform as follows: year 1, $13,000 net loss; year 2, $32,500 net income; and year 3, $54,167 net income eBook Print ferences Required Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of the four plans being considered. (Enter all allowances as positive values. Enter losses as negative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar.) Complete this question by entering your answers in the tabs below Year 1 Year 2 Year 3 Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of the four plans being considered. Year 1 cation here to search
Expert Answer
| Year 1 | |||||
| Part (a) | Watts | Lyon | Total | ||
| Net Income/(loss) | ($13,000) | ||||
| Balance allocated in proportion to initial investment | 27000/100000*-13000 | -3510 | 63000/100000*-13000 | -8190 | 13000 |
| Balance of income/(loss) | 0 | ||||
| Share to partners | -3510 | -8190 | ($13,000) | ||
| Plan b | |||||
| Net Income/(loss) | ($13,000) | ||||
| Balance allocated in proportion to time devoted | -13000*.25/1.25 | -2600 | -13000*1/1.25 | -10400 | 13000 |
| Balance of income/(loss) | 0 | ||||
| Share to partners | -2600 | -10400 | ($13,000) | ||
| Plan c | |||||
| Net Income/(loss) | -13000 | ||||
| Salary Allowance | 1750*12 | 21000 | -21000 | ||
| Balance of income/(loss) | -34000 | ||||
| Balance allocated in proportion to initial investment | 30%*-34000 | -10200 | 70%*-34000 | -23800 | -34000 |
| Balance of income/(loss) | 0 | ||||
| Share to partners | -10200 | -2800 | -13000 | ||
| Plan d | |||||
| Net Income/(loss) | -13000 | ||||
| Salary Allowance | 1750*12 | 21000 | -21000 | ||
| Balance of income/(loss) | -34000 | ||||
| Interest alowances | 3240 | 7560 | -10800 | ||
| Balance of income/(loss) | -44800 | ||||
| balance allocated equally | 50%*-44800 | -22400 | 50%*-44800 | -22400 | 44800 |
| Balance of income/(loss) | 0 | ||||
| Watts | Lyon | ||||
| Initial investment % | 30 | 70 | |||
| 27/90*100 | 63/90*100 | ||||
| Interest | 3240 | 7560 | |||
| 27000*12% | 63000*12% | ||||
| Year 2 | |||||
| Part (a) | Watts | Lyon | Total | ||
| Net Income/(loss) | $32,500 | ||||
| Balance allocated in proportion to initial investment | 32500*30% | $9,750 | 32500*70% | $22,750 | ($32,500) |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 9750 | 22750 | $32,500 | ||
| Plan b | |||||
| Net Income/(loss) | $32,500 | ||||
| Balance allocated in proportion to time devoted | 32500*.25/1.25 | 6500 | 32500*1/1.25 | 26000 | ($32,500) |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 6500 | 26000 | $32,500 | ||
| Plan c | |||||
| Net Income/(loss) | 32500 | ||||
| Salary Allowance | 1750*12 | 21000 | -21000 | ||
| Balance of income/(loss) | 11500 | ||||
| Balance allocated in proportion to initial investment | 30%*11500 | 3450 | 70%*11500 | 8050 | 11500 |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 3450 | 29050 | 32500 | ||
| Plan d | |||||
| Net Income/(loss) | 32500 | ||||
| Salary Allowance | 1750*12 | 21000 | -21000 | ||
| Balance of income/(loss) | 11500 | ||||
| Interest alowances | 3240 | 7560 | -10800 | ||
| Balance of income/(loss) | 700 | ||||
| balance allocated equally | 50%*700 | 350 | 50%*700 | 350 | -700 |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 3590 | 28910 | 32500 | ||
| Year 3 | |||||
| Part (a) | Watts | Lyon | Total | ||
| Net Income/(loss) | $54,167 | ||||
| Balance allocated in proportion to initial investment | 54167*30% | $16,250 | 54167*70% | $37,917 | ($54,167) |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 16250 | 37917 | 54167 | ||
| Plan b | |||||
| Net Income/(loss) | $54,167 | ||||
| Balance allocated in proportion to time devoted | 54167*.25/1.25 | $10,833 | 54167*1/1.25 | $43,334 | ($54,167) |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 10833 | 43334 | $54,167 | ||
| Plan c | |||||
| Net Income/(loss) | $54,167 | ||||
| Salary Allowance | 1750*12 | 21000 | -21000 | ||
| Balance of income/(loss) | 33167 | ||||
| Balance allocated in proportion to initial investment | 30%*33167 | 9950 | 70%*33167 | 23217 | 33167 |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 9950 | 44217 | 54167 | ||
| Plan d | |||||
| Net Income/(loss) | $54,167 | ||||
| Salary Allowance | 1750*12 | 21000 | -21000 | ||
| Balance of income/(loss) | 33167 | ||||
| Interest alowances | 3240 | 7560 | -10800 | ||
| Balance of income/(loss) | 22367 | ||||
| balance allocated equally | 50%*22367 | 11184 | 50%*22367 | 11184 | -22367 |
| Balance of income/(loss) | 0 | ||||
| Share to partners | 14424 | 39744 | 54167 | ||
