Partnership net income of $150,000 is to be divided between two partners,Jessie Folk and Jessica Stephens,according to the following arrangement: There will be salary allowances of $86,000 for Folk and $43,000 for Stephens,with the remainder divided equally.How would the partnership record the allocation of new income to the partners?
A)Debit Income Summary for $150,000,credit J.Folk,Capital for $96,500 and credit J.Stephens,Capital for $53,500.
B)Debit J.Folk,Capital for $96,500,debit J.Stephens,Capital for $53,500,and credit Income Summary for $150,000.
C)Debit J.Folk,Capital for $96,500,debit J.Stephens,Capital for $53,500,and credit Cash for $150,000.
D)Debit J.Folk,Capital for $86,000,debit J.Stephens,Capital for $43,000,and credit Cash for $129,000.
E)Debit Income Summary for $129,000,credit J.Folk,Capital for $86,000,and credit J.Stephens,Capital for $43,000.

Question

Quizplus · Accepted Answer

The partnership net income is $150,000. After salary allowances of $86,000 for Folk and $43,000 for Stephens, $21,000 remains to be divided equally. Folk receives $96,500 ($86,000 + $10,500) and Stephens receives $53,500 ($43,000 + $10,500). The correct entry is to debit Income Summary for $150,000 and credit the partners' capital accounts accordingly.

Partnership Net Income of $150,000 Is to Be Divided Between