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Problem 12-3A Allocating partnership income LO P2

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Kara Ries, Tammy Bax, and Joe Thomas invested $20,000, $36,000, and $44,000, respectively, in a partnership. During its first calendar year, the firm earned $364,200. Prepare the entry to close the firms Income Summary account as of its December 31 year-end and to allocate the $364,200 net income to the partners under each of the following separate assumptions:

Problem 12-3A Part 1

Required: (1) The partners have no agreement on the method of sharing income and loss.

Journal entry worksheet

Record the entry to close the income summary account assuming the partners have no agreement on the method of sharing income and loss.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31	Income summary	364,200
	Kara Ries, Capital
	Tammy Bax, Capital
	Joe Thomas, Capital

Problem 12-3A Part 2

(2) The partners agreed to share income and loss in the ratio of their beginning capital investments. (Do not round intermediate calculations. Round final answers to the nearest whole dollar.)

Supporting	Percentage of	x	Income	Allocated Income
Computations	Total Equity		Summary	to Capital
Kara Ries	$20,000/$100,000	x	$364,200
Tammy Bax	$36,000/$100,000	x	$364,200
Joe Thomas	$44,000/$100,000	x	$364,200

Journal entry worksheet

Record the entry to close the income summary account assuming the partners have agreed to share income and loss in the ratio of their beginning capital investments

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31	Income summary
	Kara Ries, Capital
	Tammy Bax, Capital
	Joe Thomas, Capital

Problem 12-3A Part 3

(3) The partners agreed to share income and loss by providing annual salary allowances of $36,000 to Ries, $31,000 to Bax, and $43,000 to Thomas; granting 10% interest on the partners beginning capital investments; and sharing the remainder equally.

Supporting Calculations	Ries	Bax	Thomas	Total
Net income
Salary allowances	$36,000	$31,000	$31,000	98,000
Balance after salary allowances				(98,000)
Interest allowances				0
Balance after interest and salaries				(98,000)
Balance allocated equally				0
Balance of income				$(98,000)
Shares of the partners	$36,000	$31,000	$31,000

Journal entry worksheet

Record the entry to close the income summary account assuming the partners have agreed to share income and loss by providing annual salary allowances of $36,000 to Ries, $31,000 to Bax, and $43,000 to Thomas; granting 10% interest on the partners beginning capital investments; and sharing the remainder equally.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31