Problem 5 Partnerships 20 minutes 10 marks

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 $35,000

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 $325,000.

Required:

1. Complete the partnership income allocation table in order to determine how the $325,000 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.