The Mohamed & Ahmed Co. reports net sales $ 150,000, cost of goods sold $ 50,000,...

The Mohamed & Ahmed Co. reports net sales $ 150,000, cost of goods sold $ 50,000, selling and administrative expenses $ 37,000. Interest allowances are Mohamed $9,000 and Ahmed $6,000; partner salary allowances are Mohamed $30,000 and Ahmed $25,000 and the remainder is shared 6:4 respectively.

Instructions: Indicate the division of net income to each partner and prepare journal entry for net income/net loss division.

Solution question 4:

Item	Mohamed	Ahmed	Total

Journal entry:

Date	Account title and explanation	Debit	Credit

Solutions

Expert Solution


Allocation of Net Income
	Mohamed	Ahmed	Total
Salary Allowance	$ 30,000.00	$ 25,000.00	$ 55,000.00
Interest Allowance	$ 9,000.00	$ 6,000.00	$ 15,000.00
Net Loss in the ratio of (6:4)	$ -4,200.00	$ -2,800.00	$ -7,000.00
	$ 34,800.00	$ 28,200.00	$ 63,000.00

Net Income=Sales-cost of goods sold-Selling and Administrative expenses
Net Income=
Sales	$ 1,50,000.00
Less: COGS	$ -50,000.00
Gross Margin	$ 1,00,000.00
Less: Selling and Administrative expenses	$ -37,000.00
Net Income	$ 63,000.00


Journal Entry
General,Journal	Debit	Credit
Income Summary	$ 63,000.00
Mohmed Capital		$ 34,800.00
Ahmed Capital		$ 28,200.00
(Amount of Income distributed)

Salaries Allowance and Interest allowance are not expense of partnership,so it is not considered for calculating net income.

ekkarill92 answered 1 year ago

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