Reference no: EM133126998

Question - Farmer and Taylor formed a partnership with capital contributions of $240,000 and $290,000, respectively. Their partnership agreement calls for Farmer to receive a $78,000 per year salary allowance. The remaining income or loss is to be divided equally. Assuming net income for the current year is $183,000, determine the journal entry to allocate net income?

A) Debit Income Summary, $183,000; Credit Farmer, Capital, $130,500; Credit Taylor, Capital, $52,500.

B) Debit Income Summary, $183,000; Credit Taylor, Capital, $130,500; Credit Farmer, Capital, $52,500.

C) Debit Income Summary, $183,000; Credit Farmer, Capital, $46,620; Credit Taylor, Capital, $136,380.

D) Debit Income Summary, $183,000; Credit Farmer, Capital, $91,500; Credit Taylor, Capital, $91,500.

E) Debit Income Summary, $183,000; Credit Farmer, Capital, $162,000; Credit Taylor, Capital, $21,000.