Watts and Lyon are forming a partnership. Watts invests $40,500 and Lyon invests $49,500. The partners agree that Watts Will Work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $15,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $15,000 per year to Lyon, 11% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $13,000 net loss; Year 2, $32,500 net income; and Year 3, $54,167 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of the four plans being considered. (Enter all allowances as positive values. Enter losses and capital deficits, if any, as negative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar.)

Watts and Lyon are forming a partnership. Watts invests $40,500 and Lyon invests $49,500. The partners agree that Watts Will Work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $15,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $15,000 per year to Lyon, 11% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $13,000 net loss; Year 2, $32,500 net income; and Year 3, $54,167 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of the four plans being considered. (Enter all allowances as positive values. Enter losses and capital deficits, if any, as negative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar.)

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter15: Partnership Accounting

Section: Chapter Questions

Problem 2PA: Arun and Margot want to admit Tammy as a third partner for their partnership. Their capital balances...

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Arun and Margot want to admit Tammy as a third partner for their partnership. Their capital balances prior to Tammys admission are $50,000 each. Prepare a schedule showing how the bonus should be divided among the three, assuming the profit or loss agreement will be 1:3 once Tammy has been admitted and her contribution is: A. $20,000 B. $80,000 C. $50,000. In addition, show the resulting journal entries to each of the three partners capital accounts.
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Watts and Lyon are forming a partnership. Watts invests $24,500 and Lyon invests $45,500. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $18,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $18,000 per year to Lyon, 9% interest on their initial capital investments, and the remaining 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. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
Watts and Lyon are forming a partnership. Watts invests $40,500 and Lyon invests $49,500. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $15,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $15,000 per year to Lyon, 11% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $13,000 net loss; Year 2, $32,500 net income; and Year 3, $54,167 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
Watts and Lyon are forming a partnership. Watts invests $40,500 and Lyon invests $49,500. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $15,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $15,000 per year to Lyon, 11% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $13,000 net loss; Year 2, $32,500 net income; and Year 3, $54,167 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
Watts and Lyon are forming a partnership. Watts invests $40,500 and Lyon invests $49,500. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $15,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $15,000 per year to Lyon, 11% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $13,000 net loss; Year 2, $32,500 net income; and Year 3, $54,167 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
es Watts and Lyon are forming a partnership. Watts invests $27,000 and Lyon invests $63,000. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $18,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $18,000 per year to Lyon, 8% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $18,000 net loss; Year 2, $45,000 net income; and Year 3, $75,000 net income. Required: Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of…
Watts and Lyon are forming a partnership. Watts invests $42,000 and Lyon invests $63,000. The partners agree that Watts will work one-third of the total time devoted to the partnership and Lyon will work twothirds. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $72,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $72,000 per year to Lyon, 10% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $36,000 net loss; Year 2, $90,000 net income; and Year 3, $150,000 net income. Required Prepare three tables with the following column headings. Complete the tables, one for each of the first three years, by showing how to allocate…
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Cook, Jing, and Schwartz formed the CJS Partnership by making investments 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 Cook, $30,000 to Jing, and $80,000 to Schwartz; interest allowances of 12% on their initial capital investments; and the remaining balance shared equally. Required 1.how to distribute net income of $240,000 for the calendar year under each of the alternative plans being considered.