Jenkins, Willis, and Trent invested $200,000, $350,000, and $450,000, respectively, in a partnership. During its first year, the firm recorded net income of $600,000.
Prepare entries to close the firm’s Income Summary account as of December 31 and to allocate the net income to the partners under each of the following assumptions:
a. The partners did not produce any special agreement on the method of sharing incomes.
b. The partners agreed to share net incomes and losses in the ratio of their beginning investments.
c. The partners agreed to share income by: providing annual salary allowances of $110,000 to Jenkins, $120,000 to Willis, and $55,000 to Trent; allowing 15% interest on the partners’ beginning investments; and sharing the remainder equally.