Watts and Lyon are forming a partnership. Watts invests $40,500 and Lyon invests $49,500. The partners agree that Watts will workone-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternativeplans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to thebusiness; (c) a salary allowance of $15,000 per year to Lyon and the remaining balance in accordance with the ratio of their initialcapital investments; or (d) a salary allowance of $15,000 per year to Lyon, 11% interest on their initial capital investments, and theremaining balance shared equally. The partners expect the business to perform as follows: Year 1, $13,000 net loss; Year 2, $32,500net income; and Year 3, $54,167 net income.Required:Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners undereach of the four plans being considered. (Enter all allowances as positive values. Enter losses and capital deficits, if any, asnegative values. Do not round intermediate calculations. Round final answer to the nearest whole dollar.)X Answer is not complete.Complete this question by entering your answers in the tabs below.Year 1Year 2Year 3Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to thepartners under each of the four plans being considered.Year 1Plan (a)WattsLyonTotal$ (13,000)Net Income (loss)Balance allocated in proportionto initial investments40,500/90,0005,850 49,500/90,00013,000Balance of income (loss)$ (26.000)7,150 X Dalalice allocated in proportionto initial investmentsBalance of income (loss)Shares to the partnersPlan (b)Net Income (loss)Balance allocated in proportionto time devotedBalance of income (loss)Shares to the partnersPlan (c)Net Income (loss)Salary allowancesBalance of income (loss)Balance allocated in proportionto initial investmentsBalance of income (loss)Shares to the partnersPlan (d)Net Income (loss)Salary allowancesBalance of income (loss)Interest allowancesBalance of income (loss)Balance allocated equallyBalance of income (loss)Shares to the partners40,500/90,0001/4 ✔40,500/90,000$ 5,850Watts$5,850 49,500/90,000$3,2503,250Watts0✓12,600$ 12,600Watts$ 4,45518,950 X$ 23,4053/449,500/90,000$$$7,150 X7,150Lyon9,750 X9,750Lyon15,00015,400$ 30,400Lyon$ 15,000$5,44518,950 X$ 39,39513,000$ (26,000)$ 13,000Total$ (13,000)13,000$ (26,000)$ 13,000Total$ (13,000)15,00028,00028,000$0$ 43,000Total$ (13,000)15,00017,500 X9,9007,60037,900$ (30,300)$ 62,800

The partners working in partnership firm together shares the profits and losses on the basis 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 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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