Question

Required information The following information applies to the questions displayed below.] Mo, Lu, and Barb formed the MLB Partnership by making Investments of $80.100. $311,500 and $498,400, respectively. They predict annual partnership net Income of $623,500 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 $85.600 to Mo. $64,200 to Lu, and $97.000 to Barb; Interest allowances of 10% on their Initial capital Investments, and the remaining balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb. Required: 1. Use the table to show how to distribute net Income of $523.500 for the calendar year under each of the alternative plans being considered. (Do not round Intermediate calculations.) Income (Loss) Sharing Plan Mo Lu Barb $ Total 523.500 0 523.500 $ $ 0 MO Lu Barb Total 523.500 $ $ 523.500 Plan (a) Net Income loss Balance allocated equally Balance of income (loss) Shares to the partners Plan (b) Net Income (loss Balance allocated in proportion to initial investments Balance of income loss) Shares to the partners Plan (c) Net income (loss) Salary allowances Balance of income loss) Interest allowances Balance of income (loss) Balance allocated Balance of income (loss) Shares of the partners $ 0 MO FHFHFHI Lu IHIIHII Barb $ Total 523.500 0 ol

Answer 1

1			Income (loss) sharing plan
	Plan (a)			Mo		Lu		Barb			Total
	Net income (loss)										523500
	Balance allocated equally			174500		174500		174500			523500
				(523500/3)		(523500/3)		(523500/3)
	Balance of income or Loss										0
	Shares to the partners			174500		174500		174500			523500
	Plan (b)
	Net income (loss)										523500
	Balance allocated in proportion to initial			68786.66		26707.43		428005.9			523500
	investments (80100:311500:498400 or 801:311:4984)			523500*(801/6096)		523500*(311/6096)		523500*(4984/6096)
	Balance of income or Loss										0
	Shares to the partners			68786.66		26707.43		428005.9			523500
	Plan (c)
	Net income (loss)										523500
	Salary allowances			85600		64200		97000			246800
	Balance of income or Loss										276700
	Interest allowances			8010		31150		49840			89000
	(Initial capital balance*10%)			(80100*10%)		(311500*10%)		(498400*10%)
	Balance of income or Loss										187700
	Balance allocated		at 20:40:40	37540		75080		75080			187700
				(187700*20%)		(187700*40%)		(187700*40%)
	Balance of income or Loss										0
	Shares to the partners			131150		170430		221920			523500