Answer:
a.
Farley = $74,500
Clark = $73,500
b.1.
Dr Revenues 668,000
Cr Income summary 668,000
Dr Income summary 520,000
Cr Expenses 520,000
b.2.
Dr Income summary 58,000
Cr Martin Farley, drawing 58,000
Dr Income summary 16,500
Cr Martin Farley, capital 16,500
Dr Income summary 46,000
Cr Ashley Clark, drawings 46,000
Dr Income summary 27,500
Cr Ashley Clark, capital 27,500
c.
they would have to divide proportionally based on their salary allowances:
Martin Farley = $58,000 / $104,000 = 55.77%
Ashley Clark = $46,000 / $104,000 = 44.23%
Explanation:
Martin Farley Ashley Clark
salary allowance $58,000 $46,000
income sharing ratio 3 5
withdrawals $58,000 $46,000
revenues $668,000
<u>expenses ($520,000)</u>
net income $148,000
a. Determine the division of $148,000 net income for the year.
$148,000 net income - $58,000 - $46,000 = $44,000
$44,000:
Farley = $44,000 x 3/8 = $16,500
Clark = $44,000 x 5/8 = $27,500
net income:
Farley = $58,000 + $16,500 = $74,500
Clark = $46,000 + $27,500 = $73,500
Dr Revenues 668,000
Cr Income summary 668,000
Dr Income summary 520,000
Cr Expenses 520,000
Dr Income summary 58,000
Cr Martin Farley, drawing 58,000
Dr Income summary 16,500
Cr Martin Farley, capital 16,500
Dr Income summary 46,000
Cr Ashley Clark, drawings 46,000
Dr Income summary 27,500
Cr Ashley Clark, capital 27,500
