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Felix and lan allocate 2/5 of their partnership's profits ar entry to close the Income Summary will include

Felix and lan allocate 2/5 of their partnership's profits ar entry to close the Income Summary will include

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Question:** Felix and Ian allocate 2/5 of their partnership's profits and losses to Felix and 3/5 to Ian. The net income of the firm is $50,000. The journal entry to close the Income Summary will include ______. - ☐ debit to Felix, Capital for $30,000 - ☐ credit to Ian, Capital for $30,000 - ☐ credit to Income Summary for $50,000 - ☐ debit to Felix, Capital for $20,000 **Answer:** To determine the correct journal entry to close the Income Summary, we need to allocate the net income based on the profit-sharing ratio. 1. Felix's Share: - Allocation: 2/5 of $50,000 - Calculation: (2/5) x $50,000 = $20,000 2. Ian's Share: - Allocation: 3/5 of $50,000 - Calculation: (3/5) x $50,000 = $30,000 The correct entry will include debiting Felix's capital account for $20,000, as this represents his share of the income being transferred from the Income Summary to his capital. Therefore, the correct answer is: - ☑ debit to Felix, Capital for $20,000
Transcribed Image Text:**Question:** Felix and Ian allocate 2/5 of their partnership's profits and losses to Felix and 3/5 to Ian. The net income of the firm is $50,000. The journal entry to close the Income Summary will include ______. - ☐ debit to Felix, Capital for $30,000 - ☐ credit to Ian, Capital for $30,000 - ☐ credit to Income Summary for $50,000 - ☐ debit to Felix, Capital for $20,000 **Answer:** To determine the correct journal entry to close the Income Summary, we need to allocate the net income based on the profit-sharing ratio. 1. Felix's Share: - Allocation: 2/5 of $50,000 - Calculation: (2/5) x $50,000 = $20,000 2. Ian's Share: - Allocation: 3/5 of $50,000 - Calculation: (3/5) x $50,000 = $30,000 The correct entry will include debiting Felix's capital account for $20,000, as this represents his share of the income being transferred from the Income Summary to his capital. Therefore, the correct answer is: - ☑ debit to Felix, Capital for $20,000
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