Partners B and I receive a salary allowance of $6,000 and $14,000,respectively,and share the remainder equally.If the company earned $8,000 during the period,the entry to close the income or loss into their capital accounts is:

Question

Quizplus · Accepted Answer

The total salary allowance is $20,000 ($6,000 + $14,000). The company earned $8,000 during the period, so the total income is $28,000. The partners' share of the remainder is ($28,000 - $20,000)/2 = $4,000 each.

The entry to close the income or loss into their capital accounts would be:
Partner B Capital Account: 
- Salary Allowance: $14,000 
- Share of Profit: $4,000 
= $18,000

Partner A Capital Account:
- Salary Allowance: $6,000 
- Share of Profit: $4,000 
= $10,000

The journal entry would be:
Debit 
Partner B Capital Account: $18,000 
Partner A Capital Account: $10,000

Credit 
Income Summary Account: $28,000

Partners B and I Receive a Salary Allowance of $6,000