# Jim and Pam formed a partnership to open a paper company by investing $70,000 and$50,000,...

###### Question:

Jim and Pam formed a partnership to open a paper company by investing $70,000 and$50,000, respectively. They agreed to share profit and losses by allowing a $5,000 annual salary allowance to Jim and a$1,500 annual salary allowance to Pam. As well, each partner is to receive an interest allowance equal to a 10% return on initial capital investments, and the balance is to be divided 70% to Jim and 30% to Pam. At the end of the first year, December 31, 2020, the Income Summary had a credit balance of $60,000. Jim withdrew$3,000 during the year, and Pam withdrew $2,500. (16 marks) Jim and Pam formed a partnership to open a paper company by investing$70,000 and $50,000, respectively. They agreed to share profit and losses by allowing a$5,000 annual salary allowance to Jim and a $1,500 annual salary allowance to Pam. As well, each partner is to receive an interest allowance equal to a 10% return on initial capital investments, and the balance is to be divided 70% to Jim and 30% to Pam. At the end of the first year, December 31, 2020, the Income Summary had a credit balance of$60,000. Jim withdrew $3,000 during the year, and Pam withdrew$2,500. (16 marks) a) Show calculation, in table format, to determine each partner's share of profit in the first-year. Round calculations to the nearest dollar. Fill in the yellow squares. b) Prepare the entry to close the Income Summary account on December 31, 2020. c) Calculate the balance in each partner's capital account at the end of their first year. Share to Jim Share to Pam Total a) Profit/loss Allowances: Salary allowance Interest allowance Total allowances Balance of profit Allocation of remainder Balance of profit Total share of each partner
(Type debit account name in column C, Credit account name in Column D) Account Name Debit Date Credit

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