Terry Lam and Chris Tan have a partnership agreement with the following provisions for sharing profit or

Question:

Terry Lam and Chris Tan have a agreement with the following provisions for sharing profit or loss:
1. A salary allowance of $20,000 to Lam and $30,000 to Tan
2. An interest allowance of 5% on capital balances at the beginning of the year
3. The remainder to be divided between Lam and Tanona 3:4 basis
The capital balances on February 1, 2016, for T. Lam and C. Tan were $100,000 and $120,000, respectively. For the year ended January 31, 2017, the reported a loss of $30,000. The also reported the following: T. Lam drawings of $12,000 and C. Tan drawings of $14,400.
Instructions
(a) Prepare a schedule to show how the profit or loss is allocated to the two partners.
(b) Prepare a statement of partners' equity for the year.
(c) Prepare closing entries on January 31, 2017 to allocate the profit and to close the drawings accounts.
TAKING IT FURTHER
In general, what is the relationship between the salary allowance specified in the profit and loss ratio and a partner's drawings?
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...