Ben Conway, Ida Chan, and Clair Scott formed CCS Consulting bymaking capital contributions of $252,000, $288,000, and $182,000,respectively. They anticipate annual profit of $433,200 and areconsidering the following alternative plans of sharing profits andlosses:
a. Equally;
b. In the ratio of their initial investments; or
c. Salary allowances of $112,000 to Conway, $89,000 to Chan, and$64,000 to Scott and interest allowances of 10% on initialinvestments, with any remaining balance shared equally.
Required :
1. Use the schedule to show how a profit of $433,200 wouldbe distributed under each of the alternative plans beingconsidered. (Enter all amounts as positivevalues.)
2. Prepare a statement of changes in equityshowing the allocation of profit to the partners, assuming theyagree to use alternative (c) and the profit actually earned for theyear ended December 31, 2017, is $433,200. During the year, Conway,Chan, and Scott withdraw $44,000, $34,000, and $24,000,respectively. (Enter all amounts as positivevalues.)
3. Prepare the December 31, 2017, journal entryto close Income Summary assuming they agree to use alternative (c)and the profit is $433,200. Also, close the withdrawalsaccounts.
