Question

Farmer and Taylor formed a partnership with capital contributions of $250,000 and $300,000, respectively. Their partnership agreement calls for Farmer to receive a $80,000 per year salary. The remaining income or loss is to be divided equally. Assuming net income for the current year is $195,000, the journal entry to allocate net income is:

Answer 1

Answer:

The journal entry is made as follows;

Explanation:

Net Income $195,000

Salary of farmer ($80,000)

Net distributive income $115,000

Per partner share  $115,000/2=$57,500

Income Summary                         Dr.$115,000

Farmer Capital                               Cr.$57,500

Taylor Capital                                Cr.$57,500