Farmer and Taylor formed a partnership with capital contributions of $255,000 an

Question

Farmer and Taylor formed a partnership with capital contributions of $255,000 and $305,000, respectively. Their partnership agreement calls for Farmer to receive a $92,000 per year salary. The remaining income or loss is to be divided equaly.Assuming net loss for the current year is $26,000, the journal entry to allocate the net loss is: Multiple Choice Debit Income Summary. $26,000; Debit Farmer, Capital, $33,000; Credit Taylor, Capital, $59,000. Debit Income Summary. $26,000; Credit Farmer, Capital, $13,000; Credit Taylor, Capital, $13,000. Debit Taylor, Capital, $59,000; Credit Income Summary, $26,000; Credit Farmer, Capital, $33,000. Debit Income Summary, $26,000; DebitTaylor, Capital, $33,000; Credit Taylor, Capital, $59,000. Debit Income Summary, $26,000; Credit Taylor, Capital, $13,000; Credit Farmer, Capital, $13,000.

Explanation / Answer

Answer is Debit taylor capital $ 59000 ; Credit Income Summary $ 26000 and farmer Capital $ 33000 Explanation Income allocation Farmer Taylor Total Net loss -26000 Salary allowance 92000 -92000 Remaining Loss -118000 Share of loss -59000 -59000 118000 Share of income/ (loss) 33000 -59000 0

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