FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS
FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS
24th Edition
ISBN: 9781265497613
Author: Wild
Publisher: MCG
Question
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Chapter 12, Problem 2BPSB
To determine

Introduction:

An unincorporated association in which two or more people engage in business as co-owners for profit is known as partnership. In choosing the proper business form one of the many factors which are considered are generally taxes and liability risk. Partners can contribute as much capital to the partnership as they want while forming a partnership.

To calculate:

Prepare three tables with the following column headings. Complete the tables, one for each of the first three years, by showing how to allocate partnership income or loss to the partners under each of the four plans being considered.

Expert Solution & Answer
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Answer to Problem 2BPSB

    FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS, Chapter 12, Problem 2BPSB , additional homework tip  1
    FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS, Chapter 12, Problem 2BPSB , additional homework tip  2
    FUNDAMENTAL ACCT.PRIN.-CONNECT ACCESS, Chapter 12, Problem 2BPSB , additional homework tip  3

Explanation of Solution

The partnership income or loss should be allocated in the above manner under the four plans.

    Year 1
    Income(Loss) Sharing PlanCalculationsBellGreen
    Plan A

      (36000)×104260

      (36000)×156260

    (14400)

    (21600)

    Plan B

      (36000)×14

      (36000)×34

    (9000)

    (27000)

    Plan CSalary allowanceRemaining bal=(-36000-48000)=-84000

      (84000)×104260

      (84000)×156260

    -

    (33600)

    48000

    (50400)

    Total(33600)(2400)
    Plan DSalary allowance10% interestRemaining bal=(-36000-48000-10400-15600)=(110000)

      (110000)×12

      (110000)×12

    -

    10400

    (55000)

    48000

    15600

    (55000)

    Total(44600)8600
    Year 2
    Income(Loss) Sharing PlanCalculationsBellGreen
    Plan A

      76000×104260

      76000×156260

    30400

    45600

    Plan B

      76000×14

      76000×34

    19000

    57000

    Plan CSalary allowanceRemaining bal(76000-48000=28000)

      28000×104260

      28000×156260

    -

    11200

    48000

    16800

    Total$11200$64800
    Plan DSalary allowance10% interestRemaining bal(76000-48000-10400-15600=2000)

      2000×12

      2000×12

    -

    10400

    1000

    48000

    15600

    1000

    Total$11400$64600
    Year 3
    Income(Loss) Sharing PlanCalculationsBellGreen
    Plan A

      188000×104260

      188000×156260

    75200

    112800

    Plan B

      188000×14

      188000×34

    47000

    141000

    Plan CSalary allowanceRemaining bal(188000-48000=140000)

      140000×104260

      140000×156260

    -

    56000

    48000

    84000

    Total$56000$132000
    Plan DSalary allowance10% interestRemaining bal(188000-48000-10400-15600=114000)

      114000×12

      114000×12

    -

    10400

    57000

    48000

    15600

    57000

    Total$67400$120600

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