1

Harry, Ron and Hermione formed a partnership on January 1, 2020. According to the partnership agreement, the partners decide to share the profits and losses as follows:

All three partners receive a salary allowance of $40,000

No interest allowances are distributed

All remaining profits and losses are distributed: Harry - 40%, Ron 15%, Hermione 45%

On December 31, 2020, the partnerships first year-end, the company had a profit of $415,000.

Required:

1. Complete the partnership income allocation table in order to determine how the $415,000 profit for 2020 will be distributed amongst the partners. Use the template provided below.

2. Prepare the journal entries on December 31, 2020 to distribute the profits.

Harry	Ron	Hermione	Total
Net Profit				415,000
Salary Allowance
Balance of income to allocate
Profit allocation
Harry 40%
Ron 15%
Hermione 45%
Total share to allocate to the partner capital account

	General Journal
Date	Account Titles and Explanation	Debit	Credit