Multiple Choice
Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000, respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The remaining income or loss is to be divided equally. Assuming net income for the current year is $135,000, the journal entry to allocate net income is:
A) Debit Income Summary, $135,000; Credit Farmer, Capital, $67,500; Credit Taylor, Capital, $67,500.
B) Debit Income Summary, $135,000; Credit Farmer, Capital, $130,000; Credit Taylor, Capital, $5,000.
C) Debit Income Summary, $135,000; Credit Farmer, Capital, $106,140; Credit Taylor, Capital, $28,860.
D) Debit Income Summary, $135,000; Credit Farmer, Capital, $102,500; Credit Taylor, Capital, $32,500.
E) Debit Income Summary, $130,000; Credit Taylor, Capital, $102,500; Credit Farmer, Capital, $32,500.
Correct Answer:
Verified
Correct Answer:
Verified
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