Puff and Smoke agreed to share profits and losses in their partnership on a 7:3 basis,respectively,after a salary allowance of $25,000 is allocated to Puff.Earnings for the period total $115,000.What will be the total amount credited to Puff's Capital account when the Income Summary account is closed?

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Quizplus · Accepted Answer

First, allocate the salary allowance of $25,000 to Puff. This leaves $90,000 ($115,000 - $25,000) to be shared between Puff and Smoke. Puff's share of the remaining profit is 70% of $90,000, which is $63,000. Adding the salary allowance, the total credited to Puff's Capital account is $88,000 ($25,000 + $63,000).

Puff and Smoke Agreed to Share Profits and Losses in Their