Question

Sara King and Ray Lee are copartners in Kingslee Company. The partnership agreement provides for (1) salary allowances of $6,000 to King and $4,000 to Lee, (2) interest allowances of 10% on capital balances at the beginning of the year, and (3) dividing the remainder equally. Capital balances on January 1 were King $30,000, and Lee $20,000. In 2017, partnership net income is $20,000. The division of net income to Sara King partner.

A. Prepare a schedule showing the distribution of net income.
B. Journalize the allocation of net income.

Answer 1

Answer: Please see below for answer

Step-by-step explanation:

A)Schedule for The distribution of income

Net income = $20,000

the division of net income

Sara King Ray Lee Total

salary allowance $6,000 $4000 $10,000

interest on each capital partner"s allowance

10% of 30,000 for Sara $3000

10% of 20000 for Ray $2000

total interest allowance $5,000

Total $9,000 $6,000 $15,000

Remaining income = $20,000 -$15,000 =$5,000

Sara = 50% x 5,000 2,500

Ray = 50% x 5,000 $2500

Total remainders $5,000

Total $11,500 $8,500 $20,000

b)Journal for allocation of net income to partners capital

Account Debit Credit

Income summary $20,000

Sara King $11,500

Ray lee $8,500