Question

Ben Conway, Ida Chan, and Clair Scott formed CCS Consulting by making capital contributions of $258,000, $294,000, and $188,000, respectively. They anticipate annual profit of $444,000 and are considering the following alternative plans of sharing profits and losses:

a. Equally;
b. In the ratio of their initial investments; or
c. Salary allowances of $115,000 to Conway, $92,000 to Chan, and $67,000 to Scott and interest allowances of 10% on initial investments, with any remaining balance shared equally.

Required :
1. Use the schedule to show how a profit of $444,000 would be distributed under each of the alternative plans being considered. (Enter all amounts as positive values.)

	Profit (Loss) Sharing Plan Calculations Share to Conway Share to Chan Share to Scott Total (a) Profit $0 (b) Profit $0 (c) Profit $444,000 Salary allowances Interest allowances Total salaries and interest allocation $0 $0 $0 $0 Balance of Profit $444,000 Balance allocated equally 0 Balance of Profit $444,000 Shares of partners $0 $0 $0 $0

2. Prepare a statement of changes in equity showing the allocation of profit to the partners, assuming they agree to use alternative (c) and the profit actually earned for the year ended December 31, 2017, is $444,000. During the year, Conway, Chan, and Scott withdraw $47,000, $37,000, and $27,000, respectively. (Enter all amounts as positive values.)

	CCS Consulting Statement of Changes in Equity For Year Ended December 31, 2017 Conway Chan Scott Total Capital, January 1 0 0 0 Totals 0 0 0 0 0 Capital, December 31 0 0 0 0

3. Prepare the December 31, 2017, journal entry to close Income Summary assuming they agree to use alternative (c) and the profit is $444,000. Also, close the withdrawals accounts.

1.Record the entry to close income summary.

2.Record the entry to close withdrawals accounts.

Answer 1