Question : 7) What the closing entry to allocate net income $24,000 : 1177223

 

7) What is the closing entry to allocate net income $24,000 to Eric, Von, and Derek? Their respective capital balances are $20,000, $40,000, and $60,000. Net income is shared in a ratio of their capital balances.

A) Debit Income Summary $24,000; credit Eric, Capital $4,000; credit Von, Capital

$8,000; credit Derek, Capital $12,000

B) Debit Income Summary $24,000; credit Eric, Capital $8,000; credit Von, Capital $8,000; credit Derek, Capital $8,000

C) Debit Salary Expense $24,000; credit Salaries Payable $24,000

D) Net income cannot be allocated.

 

8) The journal entry to close a net income to the partners is to:

A) debit Income Summary; credit the capital accounts.

B) credit Income Summary; debit the capital accounts.

C) credit Net Loss; debit the capital accounts.

D) debit Net Loss; credit the capital accounts.

 

9) The average capital balances of partners Bridget and Emily are $3,000 and $6,000, respectively. Bridget and Emily work full time in the business. The business earned net income of $12,000 for the period. The partners have agreed to share earnings based upon the percentage of original investment. Bridget’s share of the net income is:

A) $4,000.

B) $6,000.

C) $8,000.

D) indeterminable.

10) The net income earned by the Cooper, Cross, and Crane partnership is $18,000. Their respective average capital balances are $20,000, $20,000, and $40,000. What is the closing entry to allocate the net income if no agreement was made for division of income?

A) Debit Income Summary $18,000; credit Cooper, Capital $6,000; credit Cross, Capital $6,000; credit Crane, Capital $6,000

B) Debit Income Summary $18,000; credit Cooper, Capital $4,500; credit Cross, Capital $4,500; credit Crane, Capital $9,000

C) Cannot allocate net income.

D) Debit Cooper, Capital $6,000; debit Cross, Capital $6,000; debit Crane, Capital $6,000; credit Income Summary $18,000

 

11) Allison and Josh are partners in a business. Allison’s capital is $60,000 and Josh’s capital is $100,000. Profits for the year are $80,000. They agree to share profits and losses as follows:

 

 

Allison

Josh

Salaries

$20,000

$40,000

Interest on capital

10%

10%

Remaining profits and losses

3/5

2/5

 

Allison’s share of the profits before paying salaries and interest on capital is:

A) $48,000.

B) $22,000.

C) $28,000.

D) $28,400.

12) Allison and Josh are partners in a business. Allison’s capital is $60,000 and Josh’s capital is $100,000. Profits for the year are $80,000. They agree to share profits and losses as follows:

 

 

Allison

Josh

Salaries

$20,000

$40,000

Interest on capital

10%

10%

Remaining profits and losses

3/5

2/5

 

Josh’s share of the profit is:

A) $32,000.

B) $44,000.

C) ($8,000).

D) None of the above.

 

13) Applying the interest allowance method, compute Taylor and Timmy’s share of net income if Taylor invested $200,000 and Timmy invested $800,000 at a 6% interest rate, with the remainder to be divided equally. Net income was $75,000.

A) Taylor, $15,000; Timmy, $60,000

B) Taylor, $37,500; Timmy, $37,500

C) Taylor, $19,500; Timmy, $55,500

D) None of these answers is correct.

 

14) The basis on which profits and losses are shared is governed by:

A) the SEC.

B) the IRS.

C) the partnership agreement.

D) the partners, and must be shared equally.

15) The different partners are taxed on:

A) the gross revenue of the partnership.

B) the amount they withdraw from the partnership.

C) the total amount of the net profit of the partnership.

D) the partners’ share of the net profit of the partnership.

 

16) The two types of allowances that may be considered before the division of profits and losses are:

A) interest and salary allowances.

B) interest and bonus allowances.

C) salary and bonus allowances.

D) bonus and liquidation allowances.