Question

Ries, Bax, and Thomas invested $52,000, $68,000, and $76,000, respectively, in a partnership. During its first calendar year, the firm earned $355,800.

Required:
Prepare the entry to close the firm’s Income Summary account as of its December 31 year-end and to allocate the $355,800 net income under each of the following separate assumptions:

3. The partners agreed to share income and loss by providing annual salary allowances of $32,000 to Ries, $27,000 to Bax, and $39,000 to Thomas; granting 10% interest on the partners’ beginning capital investments; and sharing the remainder equally.

Answer 1

Answers

[1]

Supporting Calculations	Ries	Bax	Thomas	Total
Net Income				$355,800
Salary Allowances	$32,000	$27,000	$39,000	$98,000
Balance after Salary allowances				$257,800
Interest allowances	$5,200	$6,800	$7,600	$19,600
Balance after interest & salaries				$238,200
Balance allocated Equally	$79,400	$79,400	$79,400	$238,200
Balance of Income				$0
Shares of the partner	$116,600	$113,200	$126,000

[2]

Date	General Journal	Debit	Credit
Dec-31	Income Summary	$355,800
	Kara Ries, Capital		$116,600
	Tammy Bax, Capital		$113,200
	Joe Thomas, Capital		$126,000
	( to close net income balance )