The Partnership of Lane and Starr Reports Net Income of $60,000

question 177

Multiple Choice

The partnership of Lane and Starr reports net income of $60,000. The partners share equally in income and losses. The entry to record the partners' share of net income will include a

• A) credit to Income Summary for $60,000.
• B) credit to Lane, Capital for $30,000.
• C) debit to Starr, Capital for $30,000.
• D) credit to Starr, Drawing for $30,000.

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Definitions:

Weighted-Average Method

A costing method that calculates the cost of goods sold based on the average cost of all similar items in inventory.

Conversion Costs

The sum of labor and overhead expenses required to convert raw materials into finished products.

Process Costing

Process costing is an accounting methodology adopted by companies manufacturing homogeneous products, where the costs of production are accumulated by process or department and averaged over the units produced.

Weighted-Average Method

An inventory costing method that assigns the average cost of the goods available for sale to both ending inventory and cost of goods sold.