Miguel and Smith have Capital balances on January 1st of $50,000 and $40,000 res
ID: 2392060 • Letter: M
Question
Miguel and Smith have Capital balances on January 1st of $50,000 and $40,000 respectively. The partnership income sharing agreement provides for 1) annual salaries of $22,000 for Miguel and $13,000 for Smith
2) interest at 10% on beginning Capital balances and 3) remaining income or loss to be shared 60% by Miguel and 40% by Smith.
Your answer is partially correct. Try again. (1) Prepare a schedule showing the distribution of net income, assuming net income is $50,000 negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) DIVISION OF NET INCOME McGill Smyth Total Salary allowance 50000 40000 90000 Interest allowance 22000 13000 35000 Total salaries and interest 5000 4000 9000 l??360] 1 ??6000) Remaining income deficiency 2400 Total division of net income 80600 59400 140000 (2) Prepare a schedule showing the distribution of net income, assuming net income is $36,0 negative sign preceding the number or parenthesis, e.g. -15,000, (15,000).) DIVISION OF NET INCOME McGill Smyth TotalExplanation / Answer
1. Net income of $50,000 McGil Smyth Total Net income (loss) 50000 Salary allowances 22000 13000 35000 Balance of income (loss) 15000 Interest allowances 5000 4000 9000 Balance of income (loss) 6000 Balance allocated (60%,40%) 3600 2400 6000 Share to the partners 30600 19400 50000 Working: Initial investments 50000 40000 90000 Interest allowances (10%) 5000 4000 9000 2. Net income of $36,000 McGil Smyth Total Net income (loss) 36000 Salary allowances 22000 13000 35000 Balance of income (loss) 1000 Interest allowances 5000 4000 9000 Balance of income (loss) -8000 Balance allocated (60%,40%) -4800 -3200 -8000 Share to the partners 22200 13800 36000 Working: Initial investments 50000 40000 90000 Interest allowances (10%) 5000 4000 9000 Journal entries when the net income is $50,000 a. Salary allowances No. Account Title Debit Credit 1 Income Summary 35000 McGill, Capital 22000 Smyth, Capital 13000 b. Interest allowances No. Account Title Debit Credit 1 Income Summary 9000 McGill, Capital 5000 Smyth, Capital 4000 c. Allocation of balance net income No. Account Title Debit Credit 1 Income Summary 6000 McGill, Capital 3600 Smyth, Capital 2400 Journal entries when the net income is $36,000 a. Salary allowances No. Account Title Debit Credit 1 Income Summary 35000 McGill, Capital 22000 Smyth, Capital 13000 b. Interest allowances No. Account Title Debit Credit 1 Income Summary 9000 McGill, Capital 5000 Smyth, Capital 4000 c. Allocation of balance net income No. Account Title Debit Credit 1 McGill, Capital 4800 Smyth, Capital 3200 Income Summary 8000