Mo Meek, Lu Ling and Barb Beck formed the MLB Partnership by making capital contributions of $70,200, $273,000 and $436,800, respectively. 

They forecast an annual net income for the partnership of $466,500 and are considering the following alternative income and loss distribution plans:

 (a) equitably;

 (b) in proportion to its initial capital investments; 

 (c) salary awards of $81,200 to Mo, $60,900 to Lu, and $91,500 to Barb; 10% interest rebates on your initial capital investments; and the rest is distributed as follows: 20% to Mo, 40% to Lu and 40% to Barb.

Required:
1. Use the table to show how to distribute the net income of $466,500 for the calendar year under each of the alternative plans being considered.

		Income sharing plan (loss)
Plano (a)		Mes		Lu		Tongue	Total
Net income (loss)							$466,500
Equitably Allocated Balance							0
Balance of income (loss)							$466,500
Actions to partners		$0		$0		$0	$0
Plan B)		Mes		Lu		Tongue	Total
Net income (loss)							$466,500
Balance allocated in proportion to initial investments							0
Balance of income (loss)							$466,500
Actions to partners		$0		$0		$0	$0
Plano (c)		Mes		Lu		Tongue	Total
Net income (loss)							$466,500
Salary Assignments							0
Balance of income (loss)
interest allocations							0
Balance of income (loss)
assigned balance							0
Balance of income (loss)							$0
partner actions		$0		$0		$0	$0

2. Prepare a partner wealth statement showing income allocation to partners assuming they agree to use plan (c), earned income is $466,500, and Mo, Lu, and Barb withdraw $35,700 , $49,700 and $65,700, respectively, at the end of the year.

MLB ASSOCIATION
Declaration of Patrimony of the Partners
For the year ended December 31
	Mes	Lu	Tongue	Total
Initial partnership investments				0
Net Income
total net income				0
Total	0	0	0	0
				0
	$0	$0	$0	$0

3. Prepare the December 31 journal entry to close the Income Summary, assuming they agree to use plan (c) and net income is $466,500. Mo, Lu, and Barb withdraw $35,700, $49 700 and $65,700, respectively, at the end of the year. Also close withdrawal accounts.

Answer rating: 100% (QA)

Income Distribution Plans a Equitably Allocated Plan Under this plan the net income of 466500 will b... View the full answer