Farrell and Jimmy Enter into a Partnership Agreement on 1

question 39

Multiple Choice

Farrell and Jimmy enter into a partnership agreement on 1 May 2017.Farrell contributes $70,000 and Jimmy contributes $150,000 as their capital contributions.They decide to share profits and losses in the ratio of their respective capital account balances.The net profit for the year ended 31 December 2017 is $80,000.Which of the following is the correct journal entry to record the allocation of profit?

• A) \[\begin{array} { | l | l | l | }
• \hline \text { Farrell, capital } & 25,455 & \\
• \hline \text { Iimmy, captial } & 54,545 & \\
• \hline \text { Income summary } & & 80,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | c | c | }
• \hline \text { Farrell, captial } & 54,545 & \\
• \hline \text { Jimmy, capital } & & 54,545 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | l | l | }
• \hline \text { Income summary } & 80,000 & \\
• \hline \text { Farrell, capital } & & 25,455 \\
• \hline \text { Jimmy, captial } & & 54,545 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | c | c | }
• \hline \text { Income summary } & 29,090 & \\
• \hline \text { Farrell, capital } & 25,455 & \\
• \hline \text { Jimmy, capital } & & 54,545 \\
• \hline
• \end{array}\]

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Definitions:

Power

Power refers to the capacity or ability of an individual or group to influence, control, or direct the behavior of others or the course of events.

Reliable Data Source

A source that consistently provides accurate, valid, and trustworthy information.

Confounding Variables

Factors other than the independent variable that may cause or influence the outcome of a study, potentially leading to inaccurate conclusions.

Random Sample

A subset of a population chosen in such a way that every member has an equal chance of being included, ensuring the sample’s representativeness.