Need Help: Zheng invested $164,000 and Murray invested $264,000 in a partnership

Question

Need Help:

Zheng invested $164,000 and Murray invested $264,000 in a partnership. They agreed to share incomes and losses by allowing a $76,000 per year salary allowance to Zheng and a $56,000 per year salary allowance to Murray, plus an interest allowance on the partners’ beginning-year capital investments at 10%, with the balance to be shared equally. Assuming net income for the current year is $137,000, the journal entry to allocate net income is:

Multiple Choice

A. Debit Income Summary, $137,000; Credit Zheng, Capital, $73,500, Credit Murray, Capital, $63,500.

B. Debit Income Summary, $137,000; Credit Zheng, Capital, $47,800, Credit Murray, Capital, $89,200.

C. Debit Zheng, Capital, $73,500, Debit Murray, Capital, $63,500; Credit Income Summary, $137,000;

D. Debit Income Summary, $137,000; Credit Zheng, Capital, $45,700, Credit Murray, Capital, $91,300.

E. Debit Income Summary, $137,000; Credit Zheng, Capital, $68,500, Credit Murray, Capital, $68,500.

Explanation / Answer

Calculation net income or loss share

Net Income

$137,000

less: Salary to Zheng

($76,000)

less: Salary to Murrey

($56,000)

Less: Interest exp on partners cap account
(164,000+264,000)*10%

($42,800)

Balance Net Loss

($37,800)

Net Loss share to each partner

($18,900)

Journal entry

Income Summary

$137,000

To Zheng, Capital
(76,000+16,400-18900)

$73,500

To Murray, Capital
(56,000+26,400-18,900)

$63,500

Ans

Option (A) is correct

Calculation net income or loss share

Net Income

$137,000

less: Salary to Zheng

($76,000)

less: Salary to Murrey

($56,000)

Less: Interest exp on partners cap account
(164,000+264,000)*10%

($42,800)

Balance Net Loss

($37,800)

Net Loss share to each partner

($18,900)

Journal entry

Income Summary

$137,000

To Zheng, Capital
(76,000+16,400-18900)

$73,500

To Murray, Capital
(56,000+26,400-18,900)

$63,500

Ans

Option (A) is correct

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.