Question

Daisey Brodsky and Jim Leigh began a partnership on February 1, 2021, by investing $54,000 and $81,000, respectively. They agree to share profit and losses by allocating yearly salary allowances of $52,000 to Daisey and $38,000 to Jim, an interest allowance of 6% on their investments, and to split the remainder 55:45. During the year, Daisey withdrew $27,000 and Jim withdrew $18,000. The partnership recorded a loss of $14,000 in its first fiscal year.

Prepare a schedule showing the division of the loss for the year. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

BRODSKY AND LEIGH Division of Loss
		D. Brodsky			J. Leigh			Total
Loss								$
Salary allowance
D. Brodsky		$
J. Leigh					$
Total
Deficiency remaining for allocation
Interest allowance
D. Brodsky
J. Leigh
Total
Deficiency remaining for allocation
Fixed ratio
D. Brodsky
J. Leigh
Total
Loss remaining for allocation
Loss allocated to the partners		$			$			$

  

  

Prepare the journal entry to close the Income Summary account at the end of the year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
J. Leigh, CapitalJ. Leigh, DrawingsCashD. Brodsky, CapitalIncome Summary
J. Leigh, CapitalIncome SummaryCashJ. Leigh, DrawingsD. Brodsky, Capital
D. Brodsky, CapitalIncome SummaryJ. Leigh, CapitalCashJ. Leigh, Drawings
(To close Income Summary.)

Answer 1

• Requirement [a]

Note: In any discrepancy, please comment. It may be due to amount entered as negatives.

BRODSKY AND LEIGH
Division of Loss
	D. Brodsky	J. Leigh	Total
Loss			($14,000)
Salary allowance
D. Brodsky	$52,000		$52,000
J. Leigh		$38,000	$38,000
Total	$52,000	$38,000	$90,000
Deficiency remaining for allocation			($104,000)
Interest allowance
D. Brodsky	$3,240		$3,240
J. Leigh		$4,860	$4,860
Total	$3,240	$4,860	$8,100
Deficiency remaining for allocation			($112,100)
Fixed ratio
D. Brodsky	($61,655)		($61,655)
J. Leigh		($50,445)	($50,445)
Total	($61,655)	($50,445)	($112,100)
Loss remaining for allocation			$0
Loss allocated to the partners	($6,415)	($7,585)	($14,000)

• Journal entry

Accounts title	Debit	Credit
D. Brodsky, Capital	$6,415
J. Leigh, Capital	$7,585
Income Summary		$14,000
(closing of income cummary)