Business, 26.03.2020 20:29 Lpryor8465

Watts and Lyon are forming a partnership. Watts invests $42,000 and Lyon invests $63,000. The partners agree that Watts will work one-third of the total time devoted to the partnership and Lyon will work two-thirds. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investments; (b) in proportion to the time devoted to the business; (c) a salary allowance of $72,000 per year to Lyon and the remaining balance in accordance with the ratio of their initial capital investments; or (d) a salary allowance of $72,000 per year to Lyon, 10% interest on their initial capital investments, and the remaining balance shared equally. The partners expect the business to perform as follows: Year 1, $36,000 net loss; Year 2, $90,000 net income; and Year 3, $150,000 net income.

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Watts and Lyon are forming a partnership. Watts invests $42,000 and Lyon invests $63,000. The partne...

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