Question

Irene Watts and John Lyon are forming a partnership to which Watts will devote one-fourth time and Lyon will devote full time. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments, which they have agreed will be $35,000 for Watts and $65,000 for Lyon; (b) in proportion to the time devoted to the business; (c) a salary allowance of $1,250 per month to Lyon and the balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $1,250 per month to Lyon, 8% interest on their initial capital investments, and the balance shared equally. The partners expect the business to perform as follows: year 1, $17,000 net loss; year 2, $42,500 net income; and year 3, $70,833 net income.

2 oach of ยษ four piant beng considered (Enter all slowances as posit ve values. Enter losses es negative values. Do not round the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the 5 (17 Prey 2 of 12 lype here to search

Answer 1

Plank 70883 15000 55883 5000 Balamea dhorad1955936324 (55883) Share of paklnun 1 Plantd) Net yncam Balama Balance NIL 9559 573a 70883 1S00(ISDoo) 55883 (gooD) 47883 (47889 NIL Balance Moed ι:/ 23941 a39y2_ s 44142