Wallace and Simpson formed a partnership with Wallace contributing $100,000 and Simpson contributing $80,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $135,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is: (Do not round intermediate calculations.)

Multiple Choice

• Debit Cash $135,000; credit Wallace, Capital $75,000; credit Simpson, Capital $60,000.

• Debit Income Summary $135,000; credit Wallace, Capital $67,500; credit Simpson, Capital $67,500.

• Debit Wallace, Capital $67,500; debit Simpson, Capital $67,500; credit Income Summary $135,000.

• Debit Wallace, Capital $75,000; debit Simpson, Capital $100,000; credit Cash $135,000.

• Debit Income Summary $135,000; credit Wallace, Capital $75,000; credit Simpson, Capital $60,000.