On October 1, 2020 two work colleagues Destiny and Max formed a partnership, The Office .
On that date Destiny contributed $120,000 cash and Max contributed $20,000 cash
and office equipment with a fair market value of $30,000. Pam
had originally purchased the equipment for $50,000.
The partnership agreement states that profit will be allocated as follows:
1. an interest allowance of 20% of each partners beginning capital balance.
2. a salary allowance of $50,000 for Max and $40,000 for Destiny .
3. any remaining profit or loss will be allocated 30% to Destiny and
70% to Max.
For the year ending October 31, 2020 the partnership had consulting revenue
of $680,000, operating expenses of $305,000, Destiny withdrew cash of
$80,000 and Max withdrew cash of $145,000.
REQUIRED:
1. Calculate each partner's share of the net income (profit).
2. Prepare a Statement of Partner's Equity for the year ended
October 31, 2020.
3. Prepare the closing entries at October 31, 2020