Question

Problem 12-44 416 agree to use plan(c) and net income i $523,500.

Answer 1

Ans- Income Appropriations summary among partners:-

Particulars		Amount	Particulars	Amount
Interest on Capital @ 10%			Net Income Earned	$523,500
Mo ($80,100*10%)	$8,010
Lu ($311,500*10%)	$31,150
Barb ($498,400*10%)	$49840	$89,000
Salary Allowance
Mo	$85,600
Lu	$64,200
Barb	$97,000	$246,800
Excess amount transfer to partner's capital accounts in the ratio of 20:40:40 ($523,500-$246,800-$89,000=$187,700)
Mo ($187,700*20/100)	$37,540
Lu ($187,700*40/100)	$75,080
Barb ($187,700*40/100)	$75,080	$187,700
	$523,500			$523,500

Balance allocated to Partners as follows:-

	Mo	Lu	Barb
Interest in Capital	$8,010	$31,150	$49,840
Salary	$85,600	$64,200	$97,000
Add: Remaining Excess amount	$37,540	$75,080	$75,080
Amount Allocated	$131,150	$170,430	$221,920

Journal Entries for Closing

Date	General Journal	Debit ($)	Credit ($)
Dec.31	Income Summary A/c Dr.	523,500
	Mo Capital A/c		131,150
	Lu Capital A/c		170,430
	Barb Capital A/c		221,920
	(To record the closing entry for income summary)
Dec.31	Mo Capital A/c Dr.	42,400
	Lu Capital A/c Dr.	56,400
	Barb Capital A/c Dr.	72,400
	Mo Withdrawals A/c		42,400
	Lu Withdrawals A/c		56,400
	Barb Capital A/c		72,400
	(To record close the partners withdrawals)

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