Answered: How much is the capital of A as of…

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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A, B, C and D established a publishing company on March 31, 2021 (each contributed enough cash to start their operation) that they operate as a partnership. The partnership agreement includes the following: a. A receives annual salary of ₱250,000 and a bonus of 2% of income after all bonuses b. B receives a quarterly salary of ₱60,000 and a bonus of 3% of income after all bonuses c. All partners are to receive 10% interest on their average capital balances d. There is only one additional investment made during the year – Partner A invested additional P30,000 on September 1. There is no withdrawal during the year. The average capital balances are as follows: A – ₱70,000; B – ₱40,000; C – ₱20,000 and D – ₱60,000. Any remaining profits and loss are to be divided equally among the partners. How much is the capital of A as of December 31 if net income for 2021 is ₱693,000?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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