Sally C., Lynn X, and Ken S. formed CXS Partnership by making capital contributions of...
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Accounting
Sally C., Lynn X, and Ken S. formed CXS Partnership by making capital contributions of $144,000, $216,000, and $120,000, respectively. They predict annual partnership net income of $240,000 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 $40,000 to C.; $30,000 to X.; and $80,000 to S.; interest allowance of 12% on their initial capital investments; and the balance shared equally.
Required:
Prepare a table with the following column headings. Income (Loss) Sharing Plan Calculations Sally C. Lynn X. Ken S. Total Use the table to show how to distribute net income of $240,000 for the calendar year under each of the alternative plans being considered. (Round answers to the nearest whole dollar.)
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 $87,600, and that Sally C., Lynn X. and Ken S. withdraw $18,000, $38,000, and $24,000 respectively, at year end.
Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $87,600. Also, close the withdrawals accounts.
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