Question

Arrow and Inlet share income and losses equally after allowing for salaries to Arrow of $27,000 and $33,000 to Inlet. Net income for the partnership is $75,000. If income should be divided $34,500 to Arrow and $40,500 to Inlet, the journal entry will include a

Answer 1

Answer:

the journal entry will include a debit to income summary $ 15000

and credit to Each partner's share $ 7,500 as it is equally distributed

Explanation:

Arrow Salary $27,000

Inlet Salary $33,000

Profit = Arrow's Income Share -  Arrow's Salary= $34,500- $27,000=  $ 7,500

Profit = Inlet's Income Share - Inlet's Salary=$40,500- $33,000= $ 7,500

The profit earned was $ 15,000 after allowing each partner's salary .

Income Summary  $ 15,000 Debit

Arrow Share $7,500 Credit  

Inlet Share$ 7,500 Credit

It could be written as

Income Summary  $ 75,000 Debit

Arrow Capital $ 34,500 Credit  

Inlet Capital $ 40,500 Credit

Salary being credited to capital accounts along with the share of profit.