Required information
Problem 12-4A Partnership income allocation, statement ofpartners' equity, and closing entries LO P2
Mo, Lu, and Barb formed the MLB Partnership by makinginvestments of $67,500, $262,500, and $420,000, respectively. Theypredict annual partnership net income of $450,000 and areconsidering the following alternative plans of sharing income andloss: (a) equally; (b) in the ratio of theirinitial capital investments; or (c) salary allowances of$80,000 to Mo, $60,000 to Lu, and $90,000 to Barb; interestallowances of 10% on their initial capital investments; and theremaining balance shared as follows: 20% to Mo, 40% to Lu, and 40%to Barb.
Problem 12-4A Part 1
Required:
1. Use the table to show how to distribute netincome of $450,000 for the calendar year under each of thealternative plans being
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| | | Income (Loss) Sharing Plan | | | | | Plan (a) | | Mo | | Lu | | Barb | Total | | Net Income (loss) | | | | $450,000 | | Balance allocated equally | 1/3 | $150,000 | 1/3 | $150,000 | | $150,000 | 450,000 | | Balance of income (loss) | | | | $0 | | Shares to the partners | | $150,000 | | $150,000 | | $150,000 | $450,000 | | Plan (b) | | Mo | | Lu | | Barb | Total | | Net Income (loss) | | | | | $450,000 | | Balance allocated in proportion toinitial investments | 1/2 | $45,000 | 1/3 | $45,000 | | $45,000 | 135,000 | | Balance of income (loss) | | | | | $315,000 | | Shares to the partners | | $45,000 | | $45,000 | | $45,000 | $135,000 | | Plan (c) | | Mo | | Lu | | Barb | Total | | Net income (loss) | | | | $450,000 | | Salary allowances | | | | | | | 0 | | Balance of income (loss) | | | | | | Interest allowances | | | | | | | 0 | | Balance of income (loss) | | | | | | Balance allocated | | | | | | | 0 | | Balance of income (loss) | | | | $0 | | Shares of the partners | | $0 | | $0 | | $0 | $0 |
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