question 13 Watts and Lyon are forming a partnership. Watts invests $36,000 and Lyon invests $44,000. The partners agree
Posted: Fri Jul 01, 2022 8:41 am
question 13
Watts and Lyon are forming a partnership. Watts invests $36,000and Lyon invests $44,000. The partners agree that Watts will workone-fourth of the total time devoted to the partnership and Lyonwill work three-fourths. They have discussed the followingalternative plans for sharing income andloss: (a) in the ratio of their initial capitalinvestments; (b) in proportion to the timedevoted to the business; (c) a salary allowanceof $18,000 per year to Lyon and the remaining balance in accordancewith the ratio of their initial capital investments;or (d) a salary allowance of $18,000 per year toLyon, 12% interest on their initial capital investments, and theremaining balance shared equally. The partners expect the businessto perform as follows: Year 1, $14,000 net loss; Year 2, $35,000net income; and Year 3, $58,333 net income. Required:Complete the tables, one for each of the first three years, byshowing how to allocate partnership income or loss to the partnersunder each of the four plans being considered. (Enterall allowances as positive values. Enter losses and capitaldeficits, if any, as negative values. Do not roundintermediate calculations. Round final answer to the nearest wholedollar.)
Complete the tables, one for each of the first three years, byshowing how to allocate partnership income or loss to the partnersunder each of the four plans being considered.
Watts and Lyon are forming a partnership. Watts invests $36,000and Lyon invests $44,000. The partners agree that Watts will workone-fourth of the total time devoted to the partnership and Lyonwill work three-fourths. They have discussed the followingalternative plans for sharing income andloss: (a) in the ratio of their initial capitalinvestments; (b) in proportion to the timedevoted to the business; (c) a salary allowanceof $18,000 per year to Lyon and the remaining balance in accordancewith the ratio of their initial capital investments;or (d) a salary allowance of $18,000 per year toLyon, 12% interest on their initial capital investments, and theremaining balance shared equally. The partners expect the businessto perform as follows: Year 1, $14,000 net loss; Year 2, $35,000net income; and Year 3, $58,333 net income. Required:Complete the tables, one for each of the first three years, byshowing how to allocate partnership income or loss to the partnersunder each of the four plans being considered. (Enterall allowances as positive values. Enter losses and capitaldeficits, if any, as negative values. Do not roundintermediate calculations. Round final answer to the nearest wholedollar.)
Complete the tables, one for each of the first three years, byshowing how to allocate partnership income or loss to the partnersunder each of the four plans being considered.