Sharon and Nancy Formed a Partnership by Making Capital Contributions

Essay

Sharon and Nancy formed a partnership by making capital contributions of $130,000 and $195,000 respectively. The annual partnership income of $230,000 is to be allocated assuming a salary allowance of $40,000 to Sharon and $35,000 to Nancy; interest allowances of 12% on their initial capital investments; and the balance shared equally. Prepare the entries to record the initial capital investments, the allocation of net income, and close the partner's withdrawal accounts assuming that Sharon withdrew $50,000 and Nancy withdrew $45,000.