Rex Baker and Ty Farney are forming a partnership to which Baker will devote one half time and Farney will devote full time. They have discussed the following alternative plans for sharing income and loss: (a) in the ratio of their initial capital investment, which they have agreed will be $21,000 for Baker and $31,500 for Farney;(b) in proportion to the time devoted to the business; (c) a salary allowance of $3,000 per month to Farney, and the balance in accordance with the ratio of their initial capital investment; or (d) a salary allowance of $3,000 per month to Farney, 10% interest on their inital capital investment. and the balance shared equally.
The partners expect the business to perform as follows, year 1, 18,000net loss year 2 45,000 net income and year 3 75,000 net income.
Complete the tables one for the first 3 years, by showing how to allocate partnership income or loss to the partners