The partnership agreement of Walt, Henry and Victoria provides that profits and losses are to be divided among the partners as follows:

Walt is to receive a salary allocation of $15,000 for managing the partnership business.

Partners are to receive 10% interest on their average partner capital balances during the year. Note: Drawings are excluded from the computation of average partner capital.

Remaining profits/losses are to be divided as follows: Walt, 30%; Henry, 35%; and Victoria, 35%.

Walt had a beginning capital account balance on January 1, 2017 of $60,000 and total drawings during the year of $8,000.

Henry had a beginning capital account balance on January 1, 2017 of $90,000 and invested an additional $30,000 on September 1, 2017.

Victoria had a beginning capital account balance of $110,000 on January 1, 2017 and invested an additional $20,000 on October 1, 2017. Victoria had total drawings during the year of $12,000.

In 2018, each partner had total drawings of $10,000.

The partnership incurred a net loss of $20,000 during 2017 and had net income of $55,000 during 2018.

Requirements

Prepare a schedule showing the allocation of the partnership net loss for each year to each partner. Your schedule should show each component of the net loss or net income amount being allocated to the partner. Hint: refer to your class notes!

Prepare a statement of partnership capital for the years ending December 31, 2017 and December 31, 2018.

Prepare the necessary journal entries to allocate the net loss to the partners capital accounts and to close the partners drawing accounts for each year. You may assume that the partnerships revenues and expenses have already been closed into the Income Summary account for each year.