Question

Question 1: (6 marks) David (beginning capital, $60,000) and Gerald (beginning capital $90,000) are partners. During 2020, the partnership earned net income of $80,000, and David made drawings of $18,000 while Gerald made drawings of $24,000. Instructions a. Assume the partnership income-sharing agreement calls for income to be divided with a salary of $30,000 to David and $25,000 to Gerald, with the remainder divided 45% to David and 55% to Gerald. Prepare the journal entry to record the allocation of net income. b. Assume the partnership income-sharing agreement calls for income to be divided with a salary of $40,000 to David and $35,000 to Gerald, interest of 10% on beginning capital, and the remainder divided 50%-50%. Prepare the journal entry to record the allocation of net income.

Answer 1

a)	Journal Entries
	Particulars			Debit	Credit
	Salary Expense			$ 55,000.00
	To David, Capital				$ 30,000.00
	To Gerald, Capital				$ 25,000.00
	Income Statement			$ 25,000.00
	To David, Capital				$ 11,250.00	[($ 80000 - $ 55000) x 45%]
	To Gerald, Capital				$ 13,750.00	[($ 80000 - $ 55000) x 55%]

b)	Journal Entries
	Particulars			Debit	Credit
	Salary Expense			$ 75,000.00
	To David, Capital				$ 40,000.00
	To Gerald, Capital				$ 35,000.00
	Interest On Capital			$ 15,000.00
	To David, Capital				$   6,000.00	($ 60000 x 10%)
	To Gerald, Capital				$   9,000.00	($ 90000 x 10%)
	David, Capital			$   5,000.00		[($ 80000 - $ 75000 - $ 15000) x 50%]
	Gerald, Capital			$   5,000.00		[($ 80000 - $ 75000 - $ 15000) x 50%]
	To Income Statement				$ 10,000.00