Question

The partnership agreement of E Smith and N Patel state that Smith receives 30% and Patel 70% of partnership income and losses. The partnership net income is $100,000 and is allocated to the partners when the income summary account is closed. Which of the items will be included in the entry to close the Income Summary Account?Debit to N Patel for $70,000Credit to Income Summary for $100,000Debit to E Smith for $30,000Credit to E smith, Capital for $30,000Debit to Income Summary for $100,000Credit to N Patel for $70,000

Answer 1

Debit to Income Summary for $100,000

Credit to E smith, Capital for $30,000

Credit to N Patel for $70,000

Step-by-step explanation:

The income summary account will have a credit balance as it stores a net gain for 100,000. to closed we need to debited.

the capital accounts will icnrease according to how the partners agree to distribute gain and losses:

30% Smiths and 70% Patel

100,000 x 30% = 30,000 Smith Capital increase

100,000 x 70% = 70,000 Patel Capital increase

They should be credited as are equity account that increase

Also because debit = credit

Also, we already posted 100,000 in the debit for income summary