Question

Wallace and Simpson formed a partnership with Wallace contributing $62,000 and Simpson contributing $42,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $130,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is: (Do not round intermediate calculations.)

Answer 1

Total capital investment	104000	=62000+42000
Net income allocated to Wallace	77500	=130000*62000/104000
Net income allocated to Simpson	52500	=130000*42000/104000

When the Income Summary is closed, the journal entry to allocate partner income is

Debit Income Summary $130,000; credit Wallace, Capital $77,500; credit Simpson, Capital $52,500.