F. Calvert and G. Powers have capital balances on January 1 of $50,000 and $40,0
ID: 2346579 • Letter: F
Question
F. Calvert and G. Powers have capital balances on January 1 of $50,000 and $40,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $20,000 for Calvert and $12,000 for Powers, (2) interest at 10% on beginning capital balances, and (3) remaining income or loss to be shared 60% by Calvert and 40% by Powers.Complete the schedule showing the distribution of net income, assuming net income is (1) $50,000 and (2) $36,000. (If amount is a decrease, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
(1) F.Calvert G.Powers Total
Salary Allowance $ $ $
Interest allowance
Total salaries and interest
Remaining income
Total division $
$
$
(2) F.Calvert G.Powers Total
Salary Allowance $ $ $
Interest allowance
Total salaries and interest
Remaining income
Total division $
$
$
Journalize the allocation of net income in each of the situations above. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
Explanation / Answer
(1) Salary Allowance (20,000) (12,000) (32,000) Interest Allowance (50,000 x 10% = 5,000) (40,000 x 10% = 4,000) (9,000) Total salaries and interest (25,000) (16,000) (41,000) Remaining income (9,000 x 60% = 5,400) (9,000 x 40% = 3,600) (9,000) Total division (30,400) (19,600) (50,000) (2) Salary Allowance (20,000) (12,000) (32,000) Interest Allowance (5,000) (4,000) (9,000) Total salaries and interest (25,000) (16,000) (41,000) Remaining income (-5,000 x 60% = -3,000) (-5,000 x 40% = -2,000) (-5,000) Total division (22,000) (14,000) (36,000) (3) Situation 1 Debit Income Summary 50,000 Credit Calvert, Capital 30,400 Credit Powers, Capital 19,600 Situation 2 Debit Income Summary 36,000 Credit Calvert, Capital 22,000 Credit Powers, Capital 14,000
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