Journalize the entry to record the division of net income

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Reference no: EM132805980

Question - At the end of its first year of operations on December 31, 2020, Ivanhoe Company's accounts show the following.

Partner

Drawings

Capital

Art Niensted

$23,200

$40,600

Greg Bolen

13,800

33,500

Krista Sayler

11,300

25,000

The capital balance represents each partner's initial capital investment. Therefore, net income or net loss for 2020 has not been closed to the partners' capital accounts.

To record the division of net income for the year 2020 under each of the following independent assumptions.

1. Net income is $30,700. Income is shared 6:3:1.

2. Net income is $40,500. Niensted and Bolen are given salary allowances of $15,200 and $10,000, respectively. The remainder is shared equally.

3. Net income is $19,100. Each partner is allowed interest of 10% on beginning capital balances. Niensted is given a $15,490 salary allowance. The remainder is shared equally.

A schedule showing the division of net income under assumption (3) above. (If an amount reduces the account balance then enter with a negative sign preceding the number e.g. -15,000 or parenthesis e.g. (15,000).)

 

Art Niensted

Greg Bolen

Krista Sayler

Total

Salary allowance

15490

 

 

15490

Interest allowance on capital

4060

3350

2500

9910

Total salaries and interest

19550

3350

2500

25400

Remaining excess / deficiency

-2100

-2100

-2100

-6300

Total division of net income

17450

1250

400

19100

Required - Journalize the entry to record the division of net income for the year 2020 under each of the above independent assumptions.

Reference no: EM132805980

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