Question

Ries, Bax, and Thomas invested $56,000, $72,000, and $80,000, respectively, in a partnership. During its first calendar year, the firm earned $367,200.

Required:
Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate the $367,200 net income under each of the following separate assumptions:

3. The partners agreed to share income and loss by providing annual salary allowances of $33,000 to Ries, $28,000 to Bax, and $40,000 to Thomas; granting 10% interest on the partners’ beginning capital investments; and sharing the remainder equally.

Answer 1

Closing Entry
Particulars			Debit	Credit
Income Summary			$ 3,67,200.00
To Kara Ries, Capital				$ 1,20,400.00
To Tammy Bax, Capital				$ 1,17,000.00
To Joe Thomas, Capital				$ 1,29,800.00

Workings:

Particulars			Ries	Bax	Thomas	Total
Total income						$ 3,67,200.00
Annual salary allowances			$    33,000.00	$    28,000.00	$    40,000.00	$ 1,01,000.00
Interest on capital invested			$      5,600.00	$      7,200.00	$      8,000.00	$      20,800.00
Remaining income						$ 2,45,400.00
Sharing income equally			$    81,800.00	$    81,800.00	$    81,800.00	$ -2,45,400.00
Balances			$ 1,20,400.00	$ 1,17,000.00	$ 1,29,800.00	$                    -