Question
journalize the allocation of net income in each of the situations above.

Exercise 12-4 (Part Level Submission) McGill and Smyth have capital balances on January 1 of $41,000 and $34,000, respectivel
(2) Prepare a schedule showing the distribution of net income, assuming net income is $23,000. (If an amount reduces the acco
Journalize the allocation of net income in each of the situations above. (Credit account titles are automatically indented wh
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Answer #1

12-4

c)Journalise allocation of Net income

Debit Credit
1) Income Summary $85000
McGill Capital $50320
Smyth $34680
( To record Distribution of Net Income)
2) Income Summary $23000
McGill Capital $13120
Smyth Capital Account $9880
(To Record Distribution of Net Income )

1)Entry will be for Net Income , based on the Effect of Interest , Salary , and remaining income or loss ratio .

2) Income Statement at the end Net income is distributed to Partner as per the term decided , hence the income are adjusted accordingly .

3) As there is difficiency in (b) part , the salary and Interest on capital distribution will be reduce by the amount of deficiency which will be share in the ratio of 60:40 .

4) Hence from Income summary net income will be transfer based on all the three requirement of Income Distribution and the defficiency or profit contribution will be adjusted in Salary and interest .

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