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a. ratio of original capital balances at the beg. of the year b. ratio of capital balances at the end of the year

a. ratio of original capital balances at the beg. of the year b. ratio of capital balances at the end of the year

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PROBLEM Rhea Diaz and Fe De la Cruz Partnership had a profit of P500,000 for the year ended 2019 the first year of operations. the partnership contract provided that each partner may withdraw P10,000 on the last day of each month; both partners did so during the year. the drawings are recorded by debits to the partners' drawing accounts and shall not be considered in the division of profits or loss. it is the intention of the partners that each partner's share in the profits or loss be either credited or debited to the drawing account. Diaz invested P400,000 on Jan 1, 2019 and an additional P200,000 on April 1, 2019. De la Cruz invested P600,000 on Jan 1, 2019 and withdrew P200,000 on July 1. These transactions are summarized below: Summary of Accounts Diaz, Capital De la Cruz, Capital Jan. 1- 400,000 Jul. 1- 200,000 Jan. 1- 600,000 Apr. 1- 200,000 Diaz, Drawing De la Cruz, Drawing Jan. - Dec. 120,000 Jan. - Dec. 120,000 Income Summary Dec. 31 - 500,000 How should the profit distributions under the different profit sharing above be recorded under the following case? Based on partners' capital contributions a. ratio of original capital balances at the beg. of the year b. ratio of capital balances at the end of the year c. ratio of average capital balances
Transcribed Image Text:PROBLEM Rhea Diaz and Fe De la Cruz Partnership had a profit of P500,000 for the year ended 2019 the first year of operations. the partnership contract provided that each partner may withdraw P10,000 on the last day of each month; both partners did so during the year. the drawings are recorded by debits to the partners' drawing accounts and shall not be considered in the division of profits or loss. it is the intention of the partners that each partner's share in the profits or loss be either credited or debited to the drawing account. Diaz invested P400,000 on Jan 1, 2019 and an additional P200,000 on April 1, 2019. De la Cruz invested P600,000 on Jan 1, 2019 and withdrew P200,000 on July 1. These transactions are summarized below: Summary of Accounts Diaz, Capital De la Cruz, Capital Jan. 1- 400,000 Jul. 1- 200,000 Jan. 1- 600,000 Apr. 1- 200,000 Diaz, Drawing De la Cruz, Drawing Jan. - Dec. 120,000 Jan. - Dec. 120,000 Income Summary Dec. 31 - 500,000 How should the profit distributions under the different profit sharing above be recorded under the following case? Based on partners' capital contributions a. ratio of original capital balances at the beg. of the year b. ratio of capital balances at the end of the year c. ratio of average capital balances
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