Felix and Ian allocate 2/5 of the profits and losses to Felix and 3/5 to Ian.The net profit of the firm is $40,000.The journal entry to close the Income summary will include:
A)credit to Income summary for $40,000.
B)debit to Felix,capital for $16,000.
C)credit to Ian,capital for $24,000.
D)debit to Felix,capital for $24,000.

Question

Quizplus · Accepted Answer

Felix and Ian allocate 2/5 of the profits and losses to Felix and 3/5 to Ian. So, Felix's share of the net profit is 2/5 * $40,000 = $16,000 and Ian's share is 3/5 * $40,000 = $24,000. The journal entry to close the Income summary will include a credit to Income summary for $40,000, a debit to Felix, capital for $16,000, and a credit to Ian, capital for $24,000.

Felix and Ian Allocate 2/5 of the Profits and Losses