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Prepare the entry to admit sean to the partnership

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Question - Jon and John form a partnership to build birdhouses, with Jon contributing $25000 and John contributing $15000. Their partnership agreement includes a salary allowance of $80000 and $70000 for Jon and John, respectively. In addition, they agree to an interest allowance of 14% on initial investment. Any remaining profit will be split on a 3:5 ratio (for Jon and John, respectively).

Required -

a) Prepare the entry to close income summary assuming profit for 2020 was $150000.

b) On Jan 1, 2021, Jon and John admit Sean as a 25% partner. Sean contributes $30000. Prepare the entry to admit Sean to the partnership.

Reference no: EM133118520

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