What Is the Closing Entry to Allocate Net Income of $54,000

question 32

Multiple Choice

What is the closing entry to allocate net income of $54,000 to Sara,Ellen,and Mary? Respective capital balances are $50,000,$80,000,and $20,000.No agreement was made for division of income.

• A)Debit Income Summary $54,000;credit Sara,Capital $18,000;credit Ellen,Capital $18,000;credit Mary,Capital $18,000
• B)Debit Income Summary $54,000;credit Sara,Capital $18,000;credit Ellen,Capital $28,800;credit Mary,Capital $7,200
• C)Debit Salary Expense $54,000;credit Salaries Payable $54,000
• D)Net income cannot be allocated.

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Definitions:

Escalation Of Commitment

The decision-making error of investing additional resources in a failing course of action due to commitments already made.

Market Share

The percentage of an industry's sales that a particular company controls, signifying the company’s size and competitiveness in the market.

Informational Influence

The effect of information or knowledge from others in shaping one’s beliefs, attitudes, or behaviors, often occurring in social settings where individuals look to others for guidance in uncertain situations.

Normative Influence

The impact of the expectation of conforming to the norms of a given group, which guides an individual's behavior to match group standards.