Problem D-3A Partnership income allocation, statement of partners\' equity, and

Question

Problem D-3A Partnership income allocation, statement of partners' equity, and closing entries LO P2 The following information applies to the questions displayed below.] Bill Beck, Bruce Beck, and Barb Beck formed the BB8 Partnership by making capital contributions of $68,400, $266,000, and S425,600, respectively. They predict annual pertnership net income of 456,000 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 $80,400 to Bill, $60,300 to Bruce and $90,500 to Bart: Interest llowances of 10% on their initial capital investments and the balance shared as follows: 20% to Bill, 40% to Bruce, and 40% to Barb.

Explanation / Answer

Answer 1. Plan a. Bill Beck Bruce Beck Barb Beck Total Net Income (Loss)     456,000.00 Balance allocated equally    152,000.00    152,000.00 152,000.00     456,000.00 Balance of Income (Loss)                  0.00 Shares to partners    152,000.00    152,000.00 152,000.00 Plan b. Bill Beck Bruce Beck Barb Beck Total Net Income (Loss)     456,000.00 Balance allocated in propotion to intial Investments      41,040.00    159,600.00 255,360.00     456,000.00 Balance of Income (Loss)                       -   Shares to partners      41,040.00    159,600.00 255,360.00 Percentage based on Intial Capital: Mo Meek - $68,400 / $760,000 9% Lu Ling - $266,000 / $760,000 35% Barb Beck - $425,600 / $760,000 56% Plan c. Bill Beck Bruce Beck Barb Beck Total Net Income (Loss)     456,000.00 Salary Allowance      80,400.00      60,300.00     90,500.00     231,200.00 Balance of Income (Loss)     224,800.00 Interest Allowance - 10%        6,840.00      26,600.00     42,560.00        76,000.00 Balance of Income (Loss)     148,800.00 Balance allocated - 20:40:40      29,760.00      59,520.00     59,520.00     148,800.00 Balance of Income (Loss)                       -   Shares to partners    117,000.00    146,420.00 192,580.00 Answer 2. Bill Beck Bruce Beck Barb Beck Total Net Income (Loss)     210,700.00 Salary Allowance      80,400.00      60,300.00     90,500.00     231,200.00 Balance of Income (Loss)     (20,500.00) Interest Allowance - 10%        6,840.00      26,600.00     42,560.00        76,000.00 Balance of Income (Loss)     (96,500.00) Balance allocated - 20:40:40    (19,300.00)    (38,600.00) (38,600.00)     (96,500.00) Balance of Income (Loss)                       -   Shares to partners      67,940.00      48,300.00     94,460.00 Capital Bill Beck Bruce Beck Barb Beck Intial Investment      68,400.00    266,000.00 425,600.00 Add: Net Income      67,940.00      48,300.00     94,460.00 Sub-total    136,340.00    314,300.00 520,060.00 Less: Withdrawl    (34,500.00)    (48,500.00) (64,500.00) Enidng Balance    101,840.00    265,800.00 455,560.00 Answer 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Income Summary     210,700.00 Bill Beck, Capital    67,940.00 Bruce Beck, Capital    48,300.00 Barb Beck, Capital    94,460.00 (record the closing of income summary) 2 Bill Beck, Capital        34,500.00 Bruce Beck, Capital        48,500.00 Barb Beck, Capital        64,500.00 Bill Beck, Withdrawl    34,500.00 Bruce Beck, Withdrawl    48,500.00 Barb Beck, Withdrawl    64,500.00 (record the closing of withdrawl accont)

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