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

Mo, Lu, and Barb formed the MLB Partnership by makinginvestments of $67,500, $262,500, and $420,000, respectively. Theypredict annual partnership net income of $450,000 and areconsidering the following alternative plans of sharing income andloss: (a) equally; (b) in the ratio of theirinitial capital investments; or (c) salary allowances of$80,000 to Mo, $60,000 to Lu, and $90,000 to Barb; interestallowances of 10% on their initial capital investments; and theremaining balance shared as follows: 20% to Mo, 40% to Lu, and 40%to Barb.

Problem 12-4A Part 1

Required:
1. Use the table to show how to distribute netincome of $450,000 for the calendar year under each of thealternative plans being

Income (Loss) Sharing Plan Plan (a) Mo Lu Barb Total Net Income (loss) $450,000 Balance allocated equally 1/3 $150,000 1/3 $150,000 $150,000 450,000 Balance of income (loss) $0 Shares to the partners $150,000 $150,000 $150,000 $450,000 Plan (b) Mo Lu Barb Total Net Income (loss) $450,000 Balance allocated in proportion toinitial investments 1/2 $45,000 1/3 $45,000 $45,000 135,000 Balance of income (loss) $315,000 Shares to the partners $45,000 $45,000 $45,000 $135,000 Plan (c) Mo Lu Barb Total Net income (loss) $450,000 Salary allowances 0 Balance of income (loss) Interest allowances 0 Balance of income (loss) Balance allocated 0 Balance of income (loss) $0 Shares of the partners $0 $0 $0 $0