Adam,Bill and Charlie are partners.The profit and rule sharing rule between them is 2:6:2,with Bill getting the most and Adam getting the least.The partnership incurs a net loss of $76,000.While closing the Income summary:
A)Adam,capital will be credited for $45,600.
B)Income summary will be debited for $76,000.
C)Charlie,capital will be credited for $45,600.
D)Adam,capital will be debited for $15,200.

Question

Quizplus · Accepted Answer

Since the partnership incurred a net loss, the Income Summary account is debited for the entire amount of the loss, which is $76,000. To close this account, it needs to be credited to bring its balance to zero. According to the profit and rule sharing agreement, Adam is responsible for 2/10 of the loss, which is $15,200 ($76,000 x 2/10). Therefore, Adam's Capital account should be debited for $15,200 to close the Income Summary account. Charlie's Capital account should be credited for the same amount, and Bill's Capital account should be credited for $45,600 ($76,000 x 6/10) to balance the total debits and credits.

Adam,Bill and Charlie Are Partners