Need Help: Farmer and Taylor formed a partnership with capital contributions of
ID: 2512911 • Letter: N
Question
Need Help:
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 equally. Assuming net loss for the current year is $26,000, the journal entry to allocate the net loss is:
Multiple Choice
A. Debit Income Summary, $26,000; Credit Taylor, Capital, $13,000; Credit Farmer, Capital, $13,000.
B. Debit Income Summary, $26,000; Credit Farmer, Capital, $13,000; Credit Taylor, Capital, $13,000.
C. Debit Income Summary, $26,000; Debit Farmer, Capital, $33,000; Credit Taylor, Capital, $59,000.
D. Debit Income Summary, $26,000; DebitTaylor, Capital, $33,000; Credit Taylor, Capital, $59,000.
E. Debit Taylor, Capital, $59,000; Credit Income Summary, $26,000; Credit Farmer, Capital, $33,000.
Explanation / Answer
Net loss
$26,000
Add: Salary paid
$92,000
Balance net loss
$118,000
Share of each partner
$59,000
Journal entry for recording Net loss of $26,000
Date
Particulars
Debit
Credit
Taylor, Capital
$59,000
To Income summary
$26,000
To Farmer, Capital (92,000-59,000)
$33,000
(Being net loss recorded)
Ans
Option (E) is correct
Net loss
$26,000
Add: Salary paid
$92,000
Balance net loss
$118,000
Share of each partner
$59,000
Journal entry for recording Net loss of $26,000
Date
Particulars
Debit
Credit
Taylor, Capital
$59,000
To Income summary
$26,000
To Farmer, Capital (92,000-59,000)
$33,000
(Being net loss recorded)
Ans
Option (E) is correct
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