Question

Cook and Parker formed a partnership with capital contributions of $50,000 and $60,000 respectively. Their partnership agreement called for Cook to receive a $9,000 annual salary allowance, and each partner to receive a share of profit equal to a 5% return on capital investments. The remaining income or loss is to be divided 50% to Cook and 50% to Parker. If the profit for the year is $105,000, what are Cook and Parson's respective shares? Prepare the required closing entry.Your answer should be in the following format: DR - account name, amount. CR - account name, amount

Answer 1

Allocation of Income:
				Cook	Parker	Total
Net Income					105000
Salary allowance			9000		-9000
Remaining Income (Loss)				96000
Return on Capital @5%		2,500	3000	-5500
Remaining Income (Loss)				90500
Remaining Income to be shares equally	45250	45,250	-90500
Remaining Income (Loss)				0
Total share of income of each partner	56750	48250
Journal entry
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Dr. Income Summary			1,05,000
	Cr. Cook's Capital account			56750
	Cr. Parker Capital account			48250
	(for allocation of Income)