Return to question 7 0 Required information Part 1 of 3 [The following informati

Question

Return to question 7 0 Required information Part 1 of 3 [The following information applies to the questions displayed belowj Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $72,000 $280,000, and $448,000, respectively. They predict annual partnership net income of $477000 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 $82,000 to Mo, $61,500 to Lu, and $92,500 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 1.81 points Required 1. Use the table to show how to distribute net income of $477000 for the calendar year under each of the alternative plans being considered. (Do not round intermediate calculations.) Answer is not complete. Income (Loss) Sharing Plan Total Plan (a) Net Income (loss) Mo Lu Barb 477,000

Explanation / Answer

Solution :

Income (Loss) Sharing plan Plan Particulars Mo Meek Lu Ling Barb Beck Total a Net Income (loss) $477,000.00 Balance allocated equally 1/3 $159,000.00 1/3 $159,000.00 1/3 $159,000.00 $477,000.00 Balance of income (loss) $0.00 Shares to the partners $159,000.00 $159,000.00 $159,000.00 $477,000.00 b Net Income (loss) $477,000.00 Balance allocated in ratio of initial capital 72000/800000 $42,930.00 280000/800000 $166,950.00 448000/800000 $267,120.00 $477,000.00 Balance of income (loss) $0.00 Shares to the partners $42,930.00 $166,950.00 $267,120.00 $477,000.00 c Net Income (loss) $477,000.00 Salary Allowances $82,000.00 $61,500.00 $92,500.00 $236,000.00 Balance of Income (Loss) $241,000.00 Interest Allowances $7,200.00 $28,000.00 $44,800.00 $80,000.00 Balance of Income (Loss) $161,000.00 Balance to be allocated in capital investment (2:4:4) $32,200.00 $64,400.00 $64,400.00 $161,000.00 Balance of Income (Loss) $0.00 Total Share of Income $121,400 $153,900 $201,700 $477,000.00

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