Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 45

Sally Cook, Lin Xi, and Ken Schwartz formed the CXS Partnership by making capital contributions of $144,000, $216,000, and $120,000, respectively. They predict annual partnership net income of $240,000 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 $40,000 to Cook, $30,000 to Xi, and $80,000 to Schwartz; interest allowances of 12% on their initial capital investments; and the balance shared equally.
Required
1. Prepare a table with the following column headings.

Use the table to show how to distribute net income of $240,000 for the calendar year under each of the alternative plans being considered. (Round answers to the nearest whole dollar.)
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 $87,600, and that Cook, Xi, and Schwartz withdraw $18,000, $38,000, and $24,000, respectively, at year-end.
3. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan ( c ) and that net income is $87,600. Also close the withdrawals accounts.