Question

Problem 12-4A Partnership income allocation, statement of partners' equity, and closing entries LO P2

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Mo, Lu, and Barb formed the MLB Partnership by making investments of $76,500, $297,500, and $476,000, respectively. They predict annual partnership net income of $502,500 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 $84,000 to Mo, $63,000 to Lu, and $95,000 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.

Use the table to show how to distribute net income of $502,500 for the calendar year under each of the alternative plans being considered. (Do not round intermediate calculations.) then it gives me a blue fill in blank chart

Please show step by step so I can follow and learn how to do properly

Answer 1

(a) Profit shared equally

	Mo	Lu	Barb	Total
Capital Investment	$          76,500	$          2,97,500	$          4,76,000	$    8,50,000
Distribution of Profit	$       1,67,500	$          1,67,500	$          1,67,500	$    5,02,500
Ending Balance	$       2,44,000	$          4,65,000	$          6,43,500	$ 13,52,500

(b) Profit shared in ratio of initial capital investment

	Mo	Lu	Barb	Total
Capital Investment	$          76,500	$          2,97,500	$          4,76,000	$    8,50,000
Distribution of Profit	$          45,225	$          1,75,875	$          2,81,400	$    5,02,500
Ending Balance	$       1,21,725	$          4,73,375	$          7,57,400	$ 13,52,500

(c)

	Mo	Lu	Barb	Total
Capital Investment	$          76,500	$          2,97,500	$          4,76,000	$    8,50,000
Salary allowance	$          84,000	$             63,000	$             95,000	$    2,42,000
Interest Allowance	$            7,650	$             29,750	$             47,600	$       85,000
Distribution of Residual Profit	$          35,100	$             70,200	$             70,200	$    1,75,500
Ending Balance	$       2,03,250	$          4,60,450	$          6,88,800	$ 13,52,500