Four M Co., a partnership was formed on January 2016, with four partners, Joy, Ash, Elisha and Gabrielle. Capital contributions were as follows: Joy - P1,000,000; Ash P500,000; Elisha - P500,000; and Gabrielle - P500,000. The partnership agreement provides that each partner shall receive 5% interest on the amount of her capital contribution. In addition, Joy and Ash are to receive salaries of P100,000 and P60,000, respectively, which are to be charged as expenses of the business. The agreement further provides that Elisha shall receive a minimum of P120,000 per annum from the partnership, including amounts allowed as interest on capital and their respective shares of profits. The balance of the profits to be shared in the following proportions: Joy - 30%; Ash - 30%; Elisha - 20%; Joy - 20%. Calculate the amount that must be earned by the partnership during 2016, before any charge for interest on capital or partners' salaries, in order that Joy may receive an aggregate of P250,000, including interest, salary and share of profits. Show your solution. a. P646,667 b. P618,333 c. P285,000 d. cannot be determined
Four M Co., a partnership was formed on January 2016, with four partners, Joy, Ash, Elisha and Gabrielle. Capital contributions were as follows: Joy - P1,000,000; Ash P500,000; Elisha - P500,000; and Gabrielle - P500,000. The partnership agreement provides that each partner shall receive 5% interest on the amount of her capital contribution. In addition, Joy and Ash are to receive salaries of P100,000 and P60,000, respectively, which are to be charged as expenses of the business. The agreement further provides that Elisha shall receive a minimum of P120,000 per annum from the partnership, including amounts allowed as interest on capital and their respective shares of profits. The balance of the profits to be shared in the following proportions: Joy - 30%; Ash - 30%; Elisha - 20%; Joy - 20%. Calculate the amount that must be earned by the partnership during 2016, before any charge for interest on capital or partners' salaries, in order that Joy may receive an aggregate of P250,000, including interest, salary and share of profits. Show your solution. a. P646,667 b. P618,333 c. P285,000 d. cannot be determined
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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.
Question
Four M Co., a partnership was formed on January 2016, with four partners, Joy, Ash, Elisha and Gabrielle. Capital contributions were as follows: Joy - P1,000,000; Ash P500,000; Elisha - P500,000; and Gabrielle - P500,000. The partnership agreement provides that each partner shall receive 5% interest on the amount of her capital contribution. In addition, Joy and Ash are to receive salaries of P100,000 and P60,000, respectively, which are to be charged as expenses of the business. The agreement further provides that Elisha shall receive a minimum of P120,000 per annum from the partnership, including amounts allowed as interest on capital and their respective shares of profits. The balance of the profits to be shared in the following proportions: Joy - 30%; Ash - 30%; Elisha - 20%; Joy - 20%. Calculate the amount that must be earned by the partnership during 2016, before any charge for interest on capital or partners' salaries, in order that Joy may receive an aggregate of P250,000, including interest, salary and share of profits. Show your solution.
a. P646,667
b. P618,333
c. P285,000
d. cannot be determined
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education