Felix and Ian Allocate 2/5 of the Profits and Losses

question 122

Multiple Choice

Felix and Ian allocate 2/5 of the profits and losses to Felix and 3/5 to Ian. The net income of the firm is $30,000. The journal entry to close the Income Summary will include:

• A)credit to Ian, Capital for $18,000.
• B)debit to Felix, Capital for $18,000.
• C)debit to Felix, Capital for $12,000.
• D)credit to Income Summary for $30,000.

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Definitions:

Fitness for a Particular Purpose

An implied warranty that goods will meet the specific needs of the buyer, as known by the seller at the time of purchase.

Merchant

A person or company involved in wholesale trade, especially one dealing with foreign countries or supplying merchandise to a particular trade.

Implied Warranty

An implied warranty is a legal assumption in sales that the goods sold meet certain quality and reliability standards, even if not expressly stated.

Express Warranty

A clearly stated promise or guarantee made by a seller that a product will meet certain standards of quality and reliability.