Wallace and Simpson formed a partnership with Wallace contributing $92,000 and Simpson contributing $72,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $205,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is:
Debit Income Summary $205,000; credit Wallace, Capital $102,500; credit Simpson, Capital $102,500.
Debit Wallace, Capital $102,500; debit Simpson, Capital $102,500; credit Income Summary $205,000.
Debit Income Summary $205,000; credit Wallace, Capital $115,000; credit Simpson, Capital $90,000.
Debit Cash $205,000; credit Wallace, Capital $115,000; credit Simpson, Capital $90,000.
Debit Wallace, Capital $115,000; debit Simpson, Capital $92,000; credit Cash $205,000.