Bill Beck, Bruce Beck, and Barb Beck formed the BBB Partnership by making capital contributions of $67,500, $262,500, and $420,000, respectively. They predict annual partnership net income of $450,000 and are considering the following alternative plans of sharing income and loss:
(a) Equally;
(b) In the ratio of their initial capital investments;
(c) Salary allowances of $80,000 to Bill, $60,000 to Bruce, and $90,000 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Bill, 40% to Bruce, and 40% to Barb.
Required:
1. Prepare a table with the following column headings.
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Use the table to show how to distribute net income of $ 450,000 for the calendar year under each of the alternative plans being considered. (Round answers to the nearest whole dollar.)
2. Prepare a statement of partners equity showing the allocation of income to the partners assuming they agree to use plan (c), that income earned is $ 209,000, and that Bill, Bruce, and Barb withdraw $ 34,000, $ 48,000, and $ 64,000, respectively, at year end.
3. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $ 209,000. Also close the withdrawalsaccounts.