Question

Phillis and Case are in the process of forming a partnership to which Phillis will devote one-third time and Case will devote full time. They have discussed the following alternative plans for sharing net incomes and losses.
a. In the ratio of their initial investments, which they have agreed will be $160,000 for Phillis and $240,000 for Case.
b. In proportion to the time devoted to the business.
c. A salary allowance of $5,000 per month to Case and the balance in accordance with their initial investment ratio.
d. A $5,000 per month salary allowance to Case, 15% interest on their initial investments, and the balance equally.
The partners expect the business to generate income as follows: Year 1, $100,000 net loss; Year 2, $150,000 net income; and Year 3, $250,000 net income.

Required
Prepare four schedules with the following column headings:


Complete a schedule for each of the four plans being considered by showing how the partnership net income or loss for each year would be allocated to the partners. Round your answers to the nearest wholedollar.


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  • CreatedJanuary 08, 2015
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