Question

Kara Ries, Tammy Bax, and Joe Thomas invested $42,000, $58,000, and $66,000, respectively, in a partnership. During its first calendar year, the firm earned $418,200.

Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate the $418,200 net income to the partners under each of the following separate assumptions:

The partners agreed to share income and loss in the ratio of their beginning capital investments. (Do not round intermediate calculations. Round final answers to the nearest whole dollar.)

	Supporting Percentage of x Income Allocated Income Computations Total Equity Summary to Capital Kara Ries x Tammy Bax x Joe Thomas x

Journal entry worksheet

Record the entry to close the income summary account assuming the partners have agreed to share income and loss in the ratio of their beginning capital investments

Note: Enter debits before credits.

Date General Journal Debit Credit Dec 31 The partners agreed to share income and loss by providing annual salary allowances of $40,000 to Ries, $35,000 to Bax, and $47,000 to Thomas; granting 10% interest on the partners’ beginning capital investments; and sharing the remainder equally. Supporting Calculations Ries Bax Thomas Total Net income Salary allowances Balance after salary allowances Interest allowances Balance after interest and salaries Balance allocated equally Balance of income Shares of the partners

Journal entry worksheet

Record the entry to close the income summary account assuming the partners have agreed to share income and loss by providing annual salary allowances of $40,000 to Ries, $35,000 to Bax, and $47,000 to Thomas; granting 10% interest on the partners’ beginning capital investments; and sharing the remainder equally.

Note: Enter debits before credits.

	Date General Journal Debit Credit Dec 31

Answer 1

1) Profit share in Ratio of beginning capital :-

Supporting Computations	% of Total Equity	Income	Share in Profit(% of total Equity * Income)
Kara Ries	$42000/$166000	$418200	$105810
Tammy Bax	$58000/$166000	$418200	$146118
Joe Thomas	$66000/$166000	$418200	$166272
			$418200

Journal Entry :-

Date	Particulars	Debit($)	Credit($)
	Income A/c Dr.	418200
	To Kara Ries A/c		105810
	To Tammy Bax A/c		146118
	To Joe Thomas A/c		166272

2).

Supporting Calculations	Kara	Tammy	Joe	Total
Net Income				$418200
Less : Salary allowances	$40000	$35000	$47000	($122000)
Balance				$296200
Less : Interest Allowances(10% of Capital)	$4200	$5800	$6600	($16600)
Balance				$279600
Less : Balance Allocated Equally	93200	93200	93200	($279600)
Balance				Nil
Shares of Partners	$137400	$134000	$146800	$418200

Journal Entry :-

Date	Particulars	Debit($)	Credit($)
	Income A/c Dr.	418200
	To Kara Ries A/c		137400
	To Tammy Bax A/c		134000
	To Joe Thomas A/c		146800