ssignment l Irene Watts and John Lyon are forming a partnership to which Watts w
ID: 2391304 • Letter: S
Question
ssignment l Irene Watts and John Lyon are forming a partnership to which Watts will devote one-fourth time and Lyon will devote full time. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments, which they have agreed will be $24,000 for Watts and $56,000 for Lyon: (b) in proportion to the time devoted to the business: (c) a salary allowance of $1.000 per month to Lyon and the balance in accordance with the ratio of their initial capital investments, or (d) a salary allowance of $1,000 per month to Lyon, 9% interest on their initial capital investments, and the balance shared equal . The partners expect the business to perform as follows: year 1, $17000 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 the four plans being considered. (Enter all allowances as positlve values. Enter losses as negative values. Do not round Intermedlate calculatlons. Round final answer to the nearest whole dollar) Complete this question by entering your answers in the tabs below. Year 1 Year 2 Year 3 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. Watts Lyon Total Plan (a) Net Income (oss) Balance allocated in proportion to 24000/80,000 S (17,000) aliocated in proportion to 58,000/80.000 initial investments Balance of income (oss) Shares to the partners Plan (b) Net Income (loss) Balance allocated in proportion to S (17,000) Watts Lyon Total S 17000) time devoted Ba ance of income (oss Shares to the partners Plan (c) Total WattsExplanation / Answer
Year 1 Plan(a) Watts Lyon Total Net Income(loss) -17000 Balance allocated in perportation to initial investment 24000/80000=.3 56000/80000=.7 Balance of Income or loss -17000 Shares to partners -5100 -11900 -17000 Year 2 Plan(a) Watts Lyon Total Net Income(loss) -17000 Balance allocated in perportation to time devoted 1/4= .25 0.25/1.25=0.2 1 1/1.25=0.8 Balance of Income or loss -17000 Shares to partners -3400 -13600 -17000 Year 3 Plan(a) Watts Lyon Total Net Income(loss) -17000 Salary allowance 1000*12 12000 -12000 Balance of Income or loss -29000 Balance allocated in perportation to initial investment 24000/80000=.3 56000/80000=.7 Balance of Income or loss -29000 Shares to partners -8700 -20300 -29000 Year 4 Plan(a) Watts Lyon Total Net Income(loss) -17000 Salary allowance 1000*12 12000 -12000 Balance of Income or loss -29000 Interest Allowance 24000*9% 2160 56000*9% 5040 -7200 Balance of Income or loss -36200 Balance allocated equally 0.5 0.5 Balance of Income or loss -36200 Shares to partners -18100 -18100 -36200 Year 1 Plan(a) Watts Lyon Total Net Income(loss) 42500 Balance allocated in perportation to initial investment 24000/80000=.3 56000/80000=.7 Balance of Income or loss 42500 Shares to partners 12750 29750 42500 Year 2 Plan(a) Watts Lyon Total Net Income(loss) 42500 Balance allocated in perportation to time devoted 1/4= .25 0.25/1.25=0.2 1 1/1.25=0.8 Balance of Income or loss 42500 Shares to partners 8500 34000 42500 Year 3 Plan(a) Watts Lyon Total Net Income(loss) 42500 Salary allowance 1000*12 12000 -12000 Balance of Income or loss 30500 Balance allocated in perportation to initial investment 24000/80000=.3 56000/80000=.7 Balance of Income or loss 30500 Shares to partners 9150 21350 30500 Year 4 Plan(a) Watts Lyon Total Net Income(loss) 42500 Salary allowance 1000*12 12000 -12000 Balance of Income or loss 30500 Interest Allowance 24000*9% 2160 56000*9% 5040 -7200 Balance of Income or loss 23300 Balance allocated equally 0.5 0.5 Balance of Income or loss 23300 Shares to partners 11650 11650 23300 Year 1 Plan(a) Watts Lyon Total Net Income(loss) 70833 Balance allocated in perportation to initial investment 24000/80000=.3 56000/80000=.7 Balance of Income or loss 70833 Shares to partners 21249.9 49583.1 70833 Year 2 Plan(a) Watts Lyon Total Net Income(loss) 70833 Balance allocated in perportation to time devoted 1/4= .25 0.25/1.25=0.2 1 1/1.25=0.8 Balance of Income or loss 70833 Shares to partners 14166.6 56666.4 70833 Year 3 Plan(a) Watts Lyon Total Net Income(loss) 70833 Salary allowance 1000*12 12000 -12000 Balance of Income or loss 58833 Balance allocated in perportation to initial investment 24000/80000=.3 56000/80000=.7 Balance of Income or loss 58833 Shares to partners 17649.9 41183.1 58833 Year 4 Plan(a) Watts Lyon Total Net Income(loss) 70833 Salary allowance 1000*12 12000 -12000 Balance of Income or loss 58833 Interest Allowance 24000*9% 2160 56000*9% 5040 -7200 Balance of Income or loss 51633 Balance allocated equally 0.5 0.5 Balance of Income or loss 51633 Shares to partners 25816.5 25816.5 51633
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