Student Name:
Class:
Plans a and c
40% «- Correct!
60% «- Correct!
Plan b
33.33% «- Correct!
66.67% «- Correct!
Plans c and d
72,000$ «- Correct!
Plan d
4,200$ «- Correct!
6,300 «- Correct!
Income (Loss)
Year 1
Sharing
Plan Calculations Watts Lyon
60% x $36,000 loss
40% x $36,000 loss
33 1/3% x $36,000 loss
40% x ($36,000 loss + $72,000 salary)
66 2/3% x $36,000 loss
Salary allowance
(64,800)
(43,200)$ 7,200$
Correct! Correct!
(d) 72,000$
4,200$ 6,300
(59,250) (59,250)
(55,050)$ 19,050$
Correct! Correct!
Instructor
Preliminary Calculations
Watts and Lyon
Problem 12-02A
McGraw-Hill/Irwin
60% x ($36,000 loss + $72,000 salary)
$72,000 salary + $10,500 interest)
50% x ($36,000 loss +
Interest allowances
Salary allowance
Percentages based on initial investments:
Watts
Lyon
Percentages based on time:
Watts
Lyon
Totals
Lyon
Salary allowance
Lyon
Interest allowances
Watts
Student Name:
Class:
Instructor
Problem 12-02A
McGraw-Hill/Irwin
Income (Loss)
Year 2
Sharing
Plan Calculations Watts Lyon
(a) 36,000$
Correct! 54,000$
Correct!
(b) 30,000$
Correct! 60,000$
Correct!
(c) 72,000$
7,200$
10,800
7,200$ 82,800$
Correct! Correct!
(d) 72,000$
4,200$ 6,300
3,750 3,750
7,950$ 82,050$
Income (Loss)
Year 3
Sharing
Plan Calculations Watts Lyon
(a) 60,000$
60% x $150,000 income
40% x $150,000 income
Correct!
(b) 50,000$
Correct! 100,000$
40% x ($150,000 income – $72,000 salary)
Salary allowance
46,800$
31,200$ 118,800$
Correct! Correct!
(d) 72,000$
4,200$ 6,300
33,750 33,750
37,950$ 112,050$
Correct! Correct!
60% x $90,000 income
Totals
Interest allowances
Salary allowance
Totals
50% x ($150,000 income – $72,000 salary –
$10,500 interest)
60% x ($150,000 income – $72,000 salary)
Totals
Interest allowances
66 2/3% x $150,000 income
33 1/3% x $150,000 income
Totals
Salary allowance
50% x ($90,000 income – $72,000 salary –
$10,500 interest)
60% x ($90,000 income – $72,000 salary)
40% x ($90,000 income – $72,000 salary)
Salary allowance
40% x $90,000 income
66 2/3% x $90,000 income
33 1/3% x $90,000 income
42,000$
63,000$
6,000$
6,000$
10%
(36,000)$
90,000$
150,000$
19,050$
Lyon – initial capital investment
to Share Net Incomes and Losses
Watts and Lyon’s Alternative Plans
Plan A – in the ratio of initial capital investment
Watts – initial capital investment
Proposed salary to Lyon
Plan B – in proportion to time devoted to business:
Watts – half time
Lyon – full time
Plan C – salary to Lyon and balance in
ratio of initial capital investment
Proposed salary to Lyon
Plan D – salary to Lyon, interest on their
initial investments, balance shared equally
Check figure:
Plan D, Year 1, Lyon’s share
Proposed interest rate
Expected net income (loss):
Year 1
Year 2
Year 3
Student Name:
Class:
Income/Loss
Sharing
Plan Calculations Bill Bruce Barb Totals
a) $450,000/3 $150,000 $150,000 $150,000 $450,000
Correct! Correct! Correct! Correct!
b) $40,500
$157,500
$252,000
Total allocated $40,500 $157,500 $252,000 450,000$
Correct! Correct! Correct! Correct!
c) Net income 450,000$
Salary allowances 80,000$ 60,000$ 90,000$ (230,000)
Balance of income 220,000$
Interest allowances 6,750 26,250 42,000 (75,000)
Balance of income 145,000$
Balance allocated 29,000 58,000 58,000 (145,000)
Balance of income $0
Shares of partners 115,750$ 144,250$ 190,000$ Correct!
Correct! Correct! Correct!
Bill Bruce Barb Total
$0 $0 $0 $0
67,500 262,500 420,000 750,000
135,050$ 310,350$ 513,600$ 959,000$
(34,000) (48,000) (64,000) (146,000)
Balance allocated 20%, 40% and 40%
Total net income
Salary allowances
Net income:
101,050$ 262,350$ 449,600$ 813,000$
Correct! Correct! Correct! Correct!
Ending capital balances
$450,000x($262,500/$750,000)
$450,000x($67,500/$750,000)
BBB PARTNERSHIP
BBB PARTNERSHIP
$450,000x($420,000/$750,000)
Total
Less partners’ withdrawals
Beginning capital balances
Plus:
Problem 12-03A
McGraw-Hill/Irwin
Instructor
Investments by owners
Student Name:
Class:
Problem 12-03A
McGraw-Hill/Irwin
Instructor
Date Account Titles Debit Credit
Dec. 31 Income Summary 209,000
Bill Beck, Capital 67,550 «- Correct!
Bruce Beck, Capital 47,850 «- Correct!
Barb Beck, Capital 93,600 «- Correct!
31 Bill Beck, Capital 34,000
Bruce Beck, Capital 48,000
Barb Beck, Capital 64,000
Bill Beck, Withdrawals 34,000 «- Correct!
Bruce Beck, Withdrawals 48,000 «- Correct!
Barb Beck, Withdrawals 64,000 «- Correct!
To close withdrawal accounts.
To close Income Summary.
General Journal
BBB PARTNERSHIP
67,500$
262,500$
420,000$
450,000$
80,000$
60,000$
90,000$
10%
20%
Bruce 40%
Barb 40%
450,000$
209,000$
64,000$
209,000$
449,600$
Bill’s withdrawals
Bruce’s withdrawals
Plan C:
BBB PARTNERSHIP
Bill contribution
Bruce contribution
Barb contribution
Expected annual net income
Plans to share net incomes and losses:
Plan A: Share equally
Plan B: In ratio of initial contributions
Salary to Bill
Salary to Bruce
Salary to Barb
Interest allowance on initial contributions
Balance shared as follows:
Bill
Part 1 data:
Net income for year
Part 2 data:
Income earned
Check figure:
Part 2, Barb, Ending Capital
Barb’s withdrawals
Part 3 data:
Income earned