Determine each partner share

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Question - Liam and Katano formed a partnership to open a sushi restaurant by investing $115,000 and $125,000, respectively. They agreed to share profit based on an allocation to Liam of an annual salary allowance of $170,000, interest allowance to both Liam and Katano equal to 15% of their beginning-of-year capital balance, and any balance based on a 1:3 ratio, respectively. At the end of their first year, December 31, 2020, the Income Summary had a credit balance of $50,000. Liam withdrew $27,000 during the year and Katano $44,000.

Required -

1. Determine each partner's share if the first-year profit was $50,000. Prepare the entry to close the Income Summary on December 31, 2020.

2. Calculate the balance in each partner's capital account at the end of their first year.

Reference no: EM132854888

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