Question

Required information Problem 12-4A Partnership income allocation, statement of partners' equity, and closing entries LO P2 

Mo, Lu, and Barb formed the MLB Partnership by making investments of $68,400, $266,000, and $425,600, respectively. They predict annual partnership net income of $456,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $80,400 to Mo, $60,300 to Lu, and $90,500 to Barb; interest allowances of 10% on their initial capital investments; and the remaining balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb.

Problem 12-4A Part 2 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 $456,000, and that Mo, Lu, and Barb withdraw $34,500, $48,500, and $64,500, respectively, at year-end. (Do not round intermediate calculations. Enter all allowances as positive values. Enter losses as negative values.)

Answer 1

Statement of partners’ equity

Particulars	Mo Meek	Lu Ling	Barb Beck	Particulars	Mo Meek	Lu Ling	Barb Beck
To Drawings	34,500	48,500	64,500	By Balance	68,400	266,000	425,600
To Balance (Bal. figure)	150,900	363,920	553,680	By Salary allowance	80,400	60,300	90,500
				By Interest allowance	6,840	26,600	42,560
				By Income summary	29,760	59,520	59,520
Total	185,400	412,420	618,180	Total	185,400	412,420	618,180

Allocation Table:

	Mo Meek	Lu Ling	Barb Beck	Total
Salary Allowances	80,400	60,300	90,500	231,200
Interest Allowance - 10%	6,840	26,600	42,560	76,000
Balance Profit - 20: 40 : 40	29,760	59,520	59,520	148,800
Total	117,000	146,420	192,580	456,000