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Problem 12-4A Partnership income allocation, statement of partners' equity, and closing entries LO P2 [The following information...

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Accounting

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

[The following information applies to the questionsdisplayed below.]

Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership bymaking capital contributions of $71,100, $276,500, and $442,400,respectively. They predict annual partnership net income of$471,000 and are considering the following alternative plans ofsharing income and loss: (a) equally; (b) in the ratio of theirinitial capital investments; or (c) salary allowances of $81,600 toMo, $61,200 to Lu, and $92,000 to Barb; interest allowances of 10%on their initial capital investments; and the balance shared asfollows: 20% to Mo, 40% to Lu, and 40% to Barb.

Problem 12-4A Part 2

2. Prepare a statement of partners’ equityshowing the allocation of income to the partners assuming theyagree to use plan (c), that income earned is $471,000, and that Mo,Lu, and Barb withdraw $36,400, $50,400, and $66,400, respectively,at year-end. (Do not round intermediate calculations. Enterall allowances as positive values. Enter losses as negativevalues.)


Answer & Explanation Solved by verified expert
3.7 Ratings (488 Votes)

Req a:
Case-1
Statement of Allocation of Income:
Mo Meek Lu Ling Barb Beck Total
Net income 471000
Share of income in 1:1:1 157000 157000 157000 -471000
Partner's share 157000 157000 157000 0
Case-2
Statement of Allocation of Income:
Mo Meek Lu Ling Barb Beck Total
Net income 471000
Share of income 42390 164850 263760 -471000
(711:2765:4424)
Partner's share 42390 164850 263760 0
Case-3
Statement of Allocation of Income:
Mo Meek Lu Ling Barb Beck Total
Net income 471000
Salary allowance 81600 61200 92000 -234800
Remaining income 236200
Interest on capital 7110 27650 44240 -79000
Remaining income 157200
Share of income in 2:4:4 31440 62880 62880 -157200
Share of partners 120150 151730 199120 0
Req b:
Statement of Equity
Mo Meek Lu Ling Barb Beck Total
Beginning balance of cappital 71100 276500 442400 790000
Add: share of income 120150 151730 199120 471000
Sub-total 191250 428230 641520 1261000
Less: Drawings 36400 50400 66400 153200
Ending balance of capital 154850 377830 575120 1107800

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