Question 1 At the end of its first year of operations, on December 31, 2003, PDQ Company's accounts show the following: Partner Sue Peters Tracey Davies Eileen Quirk Drawings $21,000 Capital $42,000 12,000 7,000 27,000 22,000 The capital balance represents each partner's initial capital investment; net income or net loss for 2003 has not been closed to the partners' capital accounts. Instructions (a) Journalize the entry to record the division of net income for the year 2003 under each of the following assumptions: 1. Net loss is $13,000; Peters and Davies are given salary allowances of $8,000 and $9,000. respectively, and the remainder is shared equally. 2. Net income is $35,000; Davies and Quirk are allowed interest of 10 percent on beginning capital balances; Peters is given a $16,900 salary allowance, and the remainder is shared equally. (b) Prepare a schedule showing the division of net income under assumption (2) above. (c) Prepare a statement of partners' capital for the year under assumption (2) above. Action Plan Journalizing the division of net income is a closing entry. Allocate the provisions for salaries and interest before allocating the remainder. The Statement of Partners' Capital shows changes in individual capital accounts resulting from investments, drawings, and net income or net loss.