Mai Pavel and Renee Willmann have formed a partnership. During their first year of operations, the partnership earned $70,000. Their profit-and-loss-sharing agreement states that, first each partner will receive 10% of their capital balances. The second level is based on services, with $5,000 to Pavel and $20,000 to Willmann. The remainder then will be shared 3:2 between Pavel and Willmann, respectively.
1. Calculate the amount of income each partner will receive under their profit-and-loss sharing agreement assuming Pavel’s capital balance is $90,000 and Willmann’s capital balance is $90,000.
2. Journalize the entry to close the Income Summary account for the year.