
Requirement-1:
To prepare: Tables showing allocation of
Requirement-1:

Answer to Problem 3BPSB
Solution: Tables showing allocation of partnership income under each of the three plans are as follows:
Income (Loss) Sharing Plan | Cook | Xi | Schwartz | Total |
Plan-(a) | $ 80,000 | $ 80,000 | $ 80,000 | $ 240,000 |
Plan-(b) | $ 72,000 | $ 108,000 | $ 60,000 | $ 240,000 |
Plan-(c) | $ 68,080 | $ 66,720 | $ 105,200 | $ 240,000 |
Explanation of Solution
Explanation: Tables showing allocation of partnership income under each of the three plans are explained as follows:
Plan-(a): | Cook | Xi | Schwartz | Total |
Net Income/ (loss) for the year (A) | $ 240,000 | |||
Allocated Net Income/ (loss) = A/3 = | $ 80,000 | $ 80,000 | $ 80,000 | $ 240,000 |
Plan-(b): | Cook | Xi | Schwartz | Total |
Beginning Capital investment (A) | $ 144,000 | $ 216,000 | $ 120,000 | $ 480,000 |
Ratio (B) = (A/Total) | 0.30 | 0.45 | 0.25 | |
Net Income/ (loss) for the year (C) | $ 240,000 | |||
Allocated Net Income/ (loss) = C*B = | $ 72,000 | $ 108,000 | $ 60,000 | $ 240,000 |
Plan-(c): | Cook | Xi | Schwartz | Total |
Beginning Capital investment (A) | $ 144,000 | $ 216,000 | $ 120,000 | $ 480,000 |
Interest on beginning Capital Investment (B) = A*12% | $ 17,280 | $ 25,920 | $ 14,400 | $ 57,600 |
Salary Allowance (C) | $ 40,000 | $ 30,000 | $ 80,000 | $ 150,000 |
Total Interest and Salary (D) = B+C = | $ 57,280 | $ 55,920 | $ 94,400 | $ 207,600 |
Net Income/ (loss) for the year (E) | $ 240,000 | |||
Balance Net Income (F) = (E-F) (Divided Equally) | $ 10,800 | $ 10,800 | $ 10,800 | $ 32,400 |
Allocated Net Income = (D+F) | $ 68,080 | $ 66,720 | $ 105,200 | $ 240,000 |
Requirement-2:
To prepare: Statement of Partner’s Equity using the plan c
Requirement-2:

Answer to Problem 3BPSB
Solution: Statement of Partner’s Equity using the plan c is as follows:
Statement of Partner's Equity | ||||
Cook | Xi | Schwartz | Total | |
Beginning Capital investment | $ 144,000 | $ 216,000 | $ 120,000 | $ 480,000 |
Add: Allocated Net Income | $ 17,280 | $ 15,920 | $ 54,400 | $ 87,600 |
Less: Withdrawals | $ (18,000) | $ (38,000) | $ (24,000) | $ (80,000) |
Ending Capital balance | $ 143,280 | $ 193,920 | $ 150,400 | $ 487,600 |
Explanation of Solution
Explanation: Statement of Partner’s Equity using the plan c is prepared as follows:
Plan-(c): | Cook | Xi | Schwartz | Total |
Beginning Capital investment (A) | $ 144,000 | $ 216,000 | $ 120,000 | $ 480,000 |
Interest on beginning Capital Investment (B) = A*12% | $ 17,280 | $ 25,920 | $ 14,400 | $ 57,600 |
Salary Allowance (C) | $ 40,000 | $ 30,000 | $ 80,000 | $ 150,000 |
Total Interest and Salary (D) = B+C = | $ 57,280 | $ 55,920 | $ 94,400 | $ 207,600 |
Net Income/ (loss) for the year (E) | $ 87,600 | |||
Balance Net Income (F) = (E-F) (Divided Equally) | $ (40,000) | $ (40,000) | $ (40,000) | $(120,000) |
Allocated Net Income = (D+F) | $ 17,280 | $ 15,920 | $ 54,400 | $ 87,600 |
Statement of Partner's Equity | ||||
Cook | Xi | Schwartz | Total | |
Beginning Capital investment | $ 144,000 | $ 216,000 | $ 120,000 | $ 480,000 |
Add: Allocated Net Income | $ 17,280 | $ 15,920 | $ 54,400 | $ 87,600 |
Less: Withdrawals | $ (18,000) | $ (38,000) | $ (24,000) | $ (80,000) |
Ending Capital balance | $ 143,280 | $ 193,920 | $ 150,400 | $ 487,600 |
Requirement-3:
To prepare: Closing entries to allocate the net income to partners and closing the withdrawal accounts
Requirement-3:

Answer to Problem 3BPSB
Solution: Closing entries to allocate the net income to partners and closing the withdrawal accounts are as follows:
Closing entries as on Dec. 31 | ||
Account titles | Debit | Credit |
Income Summary | $ 87,600 | |
Cook's Capital | $ 17,280 | |
Xi's Capital | $ 15,920 | |
Schwartz's Capital | $ 54,400 | |
(Being net income allocated to partners) | ||
Cook's Capital | $ 18,000 | |
Xi's Capital | $ 38,000 | |
Schwartz's Capital | $ 24,000 | |
Cook's Withdrawal | $ 18,000 | |
Xi's Withdrawal | $ 38,000 | |
Schwartz's Withdrawal | $ 24,000 | |
(Being partner's withdrawal accounts closed) |
Explanation of Solution
Explanation: Allocation of net income to partners is explained as follows:
Plan-(c): | Cook | Xi | Schwartz | Total |
Beginning Capital investment (A) | $ 144,000 | $ 216,000 | $ 120,000 | $ 480,000 |
Interest on beginning Capital Investment (B) = A*12% | $ 17,280 | $ 25,920 | $ 14,400 | $ 57,600 |
Salary Allowance (C) | $ 40,000 | $ 30,000 | $ 80,000 | $ 150,000 |
Total Interest and Salary (D) = B+C = | $ 57,280 | $ 55,920 | $ 94,400 | $ 207,600 |
Net Income/ (loss) for the year (E) | $ 87,600 | |||
Balance Net Income (F) = (E-F) (Divided Equally) | $ (40,000) | $ (40,000) | $ (40,000) | $(120,000) |
Allocated Net Income = (D+F) | $ 17,280 | $ 15,920 | $ 54,400 | $ 87,600 |
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Chapter 12 Solutions
Fundamental Accounting Principles -Hardcover
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