Question
In: Accounting
Farmer and Taylor formed a partnership with capital contributions of $205,000 and $255,000, respectively. Their partnership...
Farmer and Taylor formed a partnership with capital contributions of $205,000 and $255,000, respectively. Their partnership agreement calls for Farmer to receive a $72,000 per year salary. The remaining income or loss is to be divided equally. Assuming net loss for the current year is $16,000, the journal entry to allocate the net loss is:
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Debit Taylor, Capital, $44,000; Credit Income Summary, $16,000; Credit Farmer, Capital, $28,000.
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Debit Income Summary, $16,000; Debit Farmer, Capital, $28,000; Credit Taylor, Capital, $44,000.
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Debit Income Summary, $16,000; Credit Farmer, Capital, $8,000; Credit Taylor, Capital, $8,000.
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Debit Income Summary, $16,000; Credit Taylor, Capital, $8,000; Credit Farmer, Capital, $8,000.
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Debit Income Summary, $16,000; Debit Taylor, Capital, $28,000; Credit Farmer, Capital, $44,000.
Solutions
Expert Solution
Correct answer-------------Debit Taylor, Capital, $44,000; Credit Income Summary, $16,000; Credit Farmer, Capital, $28,000.
Working
There is a loss of total $88000 after salary is distributed so the loss to be distributed will be $44000 for each partner.
Since farmer is getting 72000 as salary he will get $28000 net of loss and taylor will bear loss of 44000
| Farmer | Taylor | TOTAL | |
| Net income | $ (16,000.00) | ||
| Less: Salaries | $ 72,000.00 | $ - | $ (72,000.00) |
| Net income or loss to be distributed | $ (88,000.00) | ||
| Distribution of loss | $ (44,000.00) | $ (44,000.00) | $ (88,000.00) |
| Total distribution | $ 28,000.00 | -$ 44,000.00 | -$ 16,000.00 |
ekkarill92 answered 1 year agoRelated Solutions
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