A and B formed a partnership and began operations on March 1, 20x1. A invested ₱400,000 cash while B invested equipment with a book value of ₱1,200,000 and a fair value of ₱720,000. On August 31, 20x1, A invested additional cash of ₱80,000. The partnership agreement stipulates the following: Monthly salary allowances of ₱8,000 and ₱40,000 to A and B, respectively, recognized as expenses. 20% bonus on profit before salaries and interest but after bonus to B. 12% annual interest on the beginning capital of A. Balance equally. The monthly salaries are withdrawn by the partners at each month-end. The partnership earned profit of ₱840,000 during the period before deductions for bonus and interest. How much is the ending balance of B’s capital account?
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
- A and B formed a
partnership and began operations on March 1, 20x1. A invested ₱400,000 cash while B invested equipment with a book value of ₱1,200,000 and a fair value of ₱720,000. On August 31, 20x1, A invested additional cash of ₱80,000. The partnership agreement stipulates the following:
- Monthly salary allowances of ₱8,000 and ₱40,000 to A and B, respectively, recognized as expenses.
- 20% bonus on profit before salaries and interest but after bonus to B.
- 12% annual interest on the beginning capital of A.
- Balance equally.
The monthly salaries are withdrawn by the partners at each month-end. The partnership earned profit of ₱840,000 during the period before deductions for bonus and interest.
How much is the ending balance of B’s capital account?
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