Allocate income to partners Partnership Facts: 1. John, Alice and Dan are all ge

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Allocate income to partners Partnership Facts: 1. John, Alice and Dan are all general partners of a partnership. 2. John is the CEO of the partnership and is allocated a salary of $90,000 per year. 3. Alice is the CFO of the partnership and is allocated a salary of $72,000 per year. 4. Dan is not active in the partnership and is not allocated any salary. 5. All partners are allocated an interest credit from earnings of 5% of their capital account balance before any allocations. 6. The remaining profit or loss after the above allocations is split evenly three ways. 7. Capital account balance before allocations are as follows:      John $150,000.      Alice $120,000.      Dan $258,000. 8. The net income before any allocations are made is $141,000. 9. Assume that no money is distributed at this time but earnings are allocated to partner capital accounts. Allocate the net income to partners based on the above partnership terms and prepare allocation journal entries. John Alice Dan Totals Allocate income to partners Partnership Facts: 1. John, Alice and Dan are all general partners of a partnership. 2. John is the CEO of the partnership and is allocated a salary of $90,000 per year. 3. Alice is the CFO of the partnership and is allocated a salary of $72,000 per year. 4. Dan is not active in the partnership and is not allocated any salary. 5. All partners are allocated an interest credit from earnings of 5% of their capital account balance before any allocations. 6. The remaining profit or loss after the above allocations is split evenly three ways. 7. Capital account balance before allocations are as follows:      John $150,000.      Alice $120,000.      Dan $258,000. 8. The net income before any allocations are made is $141,000. 9. Assume that no money is distributed at this time but earnings are allocated to partner capital accounts. Allocate the net income to partners based on the above partnership terms and prepare allocation journal entries. John Alice Dan Totals

Explanation / Answer

John Alice Dan Totals Captial account balance    150,000    120,000    258,000    528,000 Interest @5%        7,500        6,000      12,900      26,400 Profit allocated      38,200      38,200      38,200    114,600 Profit allocation      45,700      44,200      51,100 Workings: Net income    141,000 Interest on capital      26,400    114,600 allocation      38,200 Journal Debit Credit Income Summary    141,000 John Capital      45,700 Alice Capital      44,200 Dan Capital      51,100

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