Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital con
ID: 2328322 • Letter: M
Question
Mo Meek, Lu Ling, and Barb Beck formed the MLB Partnership by making capital contributions of $75,600, $294,000, and $470,400, respectively. They predict annual partnership net income of $498,000 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 $83,600 to Mo, $62,700 to Lu, and $94,500 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared as follows: 20% to Mo, 40% to Lu, and 40% to Barb.
Explanation / Answer
Req a. Allocation of income among Partners MO LU BARB TOTAL Net income for the year 498000 To be shared equally 166000 166000 166000 -498000 Req b. Allocation of income among Partners MO LU BARB TOTAL Net income for the year 498000 To be shared in capital ratio 44820 174300 278880 -498000 (75600:294000:470400) Req c: Allocation of income among Partners MO LU BARB TOTAL Net income for the year 498000 Salary to partners 83600 62700 94500 -240800 Remaining Income 257200 Interest on capital @10% 7560 29400 47040 -84000 Remaining Income 173200 Share of Income in 2:4:4 34640 69280 69280 -173200 Total share of partners 125800 161380 210820 0