Problem 4, Prepare journal entries (in good form) to Record the division of net
ID: 2548470 • Letter: P
Question
Problem 4, Prepare journal entries (in good form) to Record the division of net income for 1999, under each assumption listed below: At the end of its first year of operations on 12/31/99, TJD Company's partnership accounts showed: Partner Drawing Capital Gorton Regal Dugan $23,000 14,000 10,000 $45,000 30,000 25,000 The capital balance for each partner has not been updated to reflect this year's net income or loss 1. Income is $25,000 and income is shared 6:3:1 2. Net income is $34,000 and Gorton and Regal receive salaries of $15,000 and $10,000 respectively. Remainder income is shared equally.Explanation / Answer
1.Income is $ 25,000 and it is shared in the ratio of 6:3:1 among Gorton, Regal and Dugan respectively
Gorton share -25000*6/10=15,000
Regal share- 25000*3/10=7,500
Dugan share -25000*1/10=2,500
Date Account title Debit $ Credit$
12/31/99 Profit and loss a/c 25,000
Capital a/c-Gorton 15,000
Capital a/c-Regal 7,500
Capital a/c-Dugan 2,500
(Being year's net income distributed among the partners in the ratio of 6:3:1)
2. Income before salaries 34000
Less: Regal salary -15000
Less: Gorton salary -10000
Balance income 9000
This will be shared equally i.e 3000 each
Date Account title Debit $ Credit$
12/31/99 Salaries a/c 25,000
Capital a/c-Gorton 10,000
Capital a/c-Regal 15,000
(Being year's salary credited to their capital accounts)
12/31/99 Profit and loss a/c 9,000
Capital a/c-Gorton 3,000
Capital a/c-Regal 3,000
Capital a/c-Dugan 3,000
(Being year's net income distributed among the partners in the ratio of 1:1:1)
Note:
1.In both the case it is assumed that given capital accounts are adjusted against drawings and then the final balance is given
2. Since salaries to be payable, I have credited them to capital account...instead once can show by crediting bank/cash a/c i.e actual payment of cash
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