Question 2:

Mohaned and Kamel are co-partners in the Alex Company. According to the partnership agreement the division of net income is as follows:

(1) Salary allowances of $8,000 to Mohaned and $6,000 to Kamel.

(2) Interest allowances of 10% on capital balances at the beginning of the year.

(3) The remainder profit is distributed equally.

Capital balances on January 1, 2020 were Mohaned $40,000, and Kamel $60,000.

The net income for 2020 is $40,000.

The drawings of Mohaned $4,000 and Kamel 5,000.

Required:

(a) Prepare a schedule showing the distribution of net income.

(b) Journalize the allocation of net income and closing the drawings.

(c) Compute the capital balances in December 31, 2020.

(d) Prepare the capital accounts.

Question 3:

Resolve question 2 assuming that the net income is $20,000.