| 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. | 1. | 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.) | 2. | 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.) | 3. | 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. | | | |
