Question

Sara King and Ray Lee are copartners in Kingslee Company. The partnership agreement provides for (1) salary allowances of $6,000 to King and $4,000 to Lee, (2) interest allowances of 10% on capital balances at the beginning of the year, and (3) dividing the remainder equally. Capital balances on January 1 were King $30,000, and Lee $20,000. In 2017, partnership net income is $20,000. The division of net income to Sara King partner.
A. Prepare a schedule showing the distribution of net income.
B. Journalize the allocation of net income.

Answer 1

Answer: Please see below for answer

Explanation:

A)Schedule for  The distribution of income

Net income = $20,000

the division of net income

                                    Sara King             Ray Lee        Total

salary allowance            $6,000                $4000        $10,000

interest on each capital partner"s allowance

10% of 30,000 for Sara  $3000

10% of 20000 for Ray                                $2000

total interest allowance                                                     $5,000

Total                         $9,000                   $6,000           $15,000

Remaining income = $20,000 -$15,000 =$5,000

Sara = 50% x 5,000        2,500

Ray = 50% x 5,000                                     $2500        

Total remainders                                                             $5,000

Total                     $11,500                     $8,500            $20,000

b)Journal for allocation of net income  to partners capital

Account                                   Debit                  Credit

Income summary              $20,000

Sara King                                                           $11,500

Ray lee                                                               $8,500