To produce a 40 page booklet 2-up on 10 sheets of 8.5 by 11 paper, in Pagemaker you set the initial page size at the same as the final booklet page size, e.g. in this case 8.5 tall by 5.5 wide. Open the document and select Double Sided and Facing Pages.
Design the pages as you want with text flowing as appropriate from one page to the next.
Save the document. Now, click Utilities ⇒ Plug-ins ⇒ Build Booklet. Set the layout to 2-up saddle stitch and click OK. A new document with the pages correctly imposed will be created.
To do the calculations by hand, or to do them in Java, here is how a 2-up imposition works:
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