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14 February, 11:10

Farmer and Taylor formed a partnership with capital contributions of $250,000 and $300,000, respectively. Their partnership agreement calls for Farmer to receive a $90,000 per year salary. The remaining income or loss is to be divided equally. Assuming net loss for the current year is $25,000, the journal entry to allocate the net loss is:

a. Debit Income Summary, $31,000; Debit Farmer, Capital, $35,500; Credit Taylor, Capital, $66,500.

b. Debit Income Summary, $31,000; Credit Farmer, Capital, $15,500; Credit Taylor, Capital, $15,500.

c. Debit Taylor, Capital, $66,500; Credit Income Summary, $31,000; Credit Farmer, Capital, $35,500.

d. Debit Income Summary, $31,000; DebitTaylor, Capital, $35,500; Credit Taylor, Capital, $66,500.

e. Debit Income Summary, $31,000; Credit Taylor, Capital, $15,500; Credit Farmer, Capital, $15,500.

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  1. 14 February, 13:27
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    Taylor's capital $57,500

    To Income summary $25,000

    To Farmer's capital $32,500

    (Being the allocation of the net loss is recorded)

    Explanation:

    Before passing the journal entry we need to do the calculations which is shown below:

    Since the net loss for the current year is $25,000

    And, the amount receiver per year is $90,000

    So, the total amount is

    = $25,000 + $90,000

    = $115,000

    Now it is equally dividend i. e $57,500 each

    So, the farmer amount credited by

    = $90,000 - $57,500

    = $32,500

    And, the taylor account debited by $57,500

    So, the journal entry is

    Taylor's capital $57,500

    To Income summary $25,000

    To Farmer's capital $32,500

    (Being the allocation of the net loss is recorded)

    This is the answer but the same is not provided in the given options
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