d. The partners agreed to share income by allowing interest of 12percent on their original investments and dividing the remainderequally.DISTRIBUTION OF INCOME BASED ON INTEREST ON INVESTMENTS ANDREMAINDER SHARED EQUALLY2013Income of Partner Income DistributedP675,000.00Total Income for DistributionDistribution of Interest:George Lopez(21)Edi Thomas(22)(23)(24)Remaining Income After InterestEqual distribution of remaining income:George Lopez(25)Edi Thomas(26)wRemaining incomeIncome of Partners(29)(30)(27)(28)P 675,000.00Income Distributed580,000.002014Income of PartnerTotal Income for DistributionPDistribution of Interest:George Lopez(31)Edi Thomas(32)(33)(34)Remaining Income After InterestEqual distribution of remaining income:George Lopez(35)(36)Edi ThomasRemaining incomeIncome of Partners(37)(38)Edi ThomasRemaining income580,000.00 Income of Partners(39)(40)P3. What are some of the factors that need to be considered in choosingthe plan of partners' income sharing among the options shown inrequirement 2?e. The partners agreed to share income by allowing salaries of P83,000for Thomas and P60,000 for Lopez, and dividing the remainder by 60percent for Thomas and 40% for Lopez.DISTRIBUTION OF INCOME BASED ON AGREED AMOUNT OF SALARY PERPARTNER WITH THE REMAINDER SHARED ON SEPCIFIC PERCENTAGES.2013Income of Partner Income DistributedTotal Income for DistributionP675,000.00Distribution of Salaries:George Lopez(41)Edi Thomas(42)(43)(44)Remaining Income After SalariesDistribution of remaining income:George Lopez(45)(46)(49)Edi ThomasRemaining incomeIncome of Partners2014Total Income for DistributionDistribution of Salaries:George Lopez(50)Income of Partner(47)(48)P675,000.00Income DistributedP580.000.00(51)Edi Thomas(52)(53)(54)Remaining Income After SalariesDistribution of remaining income:George Lopez(55)(56)(57)(58)(59)(60)580,000.00Pf. The partners agreed to share income by paying salaries of $80,000to Thomas and P56,000 to Lopez, allowing interest of 10.5 percent ontheir original investments, and dividing the remainder by 60 percent forThomas and 40% for Lopez.DISTRIBUTION OF INCOME BASED ON AGREED AMOUNT OF SALARY PERPARTNER, INTEREST ON INITIAL INVESTMENT AND THE REMAINDER ONSPECIFIC PERCENTAGES.2013Income of PartnerIncome DistributedP675,000.00Total Income For DistributionDistribution of Salaries:George Lopez(61)Edi Thomas(62)(63)Remaining Income After Salaries(64)Distribution of Interest:George Lopez(65)Edi Thomas(66)(67)Remaining Income After Salaries and InterestDistribution of Remaining Amount:George Lopez(68)Edi Thomas(69)(70)Remaining incomeIncome of Partners(72)(73)Income of Partner(71)P675,000.00Income Distributed580,000.002014PTotal Income For DistributionDistribution of Salaries:George Lopez(74)Edi Thomas(75)(76)Remaining Income After Salaries(77)Distribution of Interest:George Lopez(78)Edi Thomas(79)(80)Remaining Income After Salaries and InterestDistribution of Remaining Amount:(81)(82)(83)George LopezEdi ThomasRemaining incomeIncome of Partners(84)(85)(86)580,000.00 In January 2013, Edi Thomas and George Lopez agreed to produce and sell chocolate candiesunder the company name T&L Chocolates. Thomas contributed P580,000 in cash to the business.Lopez contributed the building and equipment, valued at P480,000 and P230,000, respectively.The partnership had an income of P675,000 during 2013 but was less successful during 2014,when income was only P580,000.JOURNAL ENTRIESCREDITDEBIT(2)(1)(3)(4)Initial investment of Edi Thomas in T&L Chocolates.(5)(6)(7)(8)(9)(10)(11)(12)Initial investment of George Lopez in T&L Chocolates.2. Determine the share of income for each partner in 2013 and 2014 undereach of the following conditions:c. The partners agreed to share income according to the ratio of theiroriginal investments.DISTRIBUTION OF INCOME BASED ON RATIO OF INITIALINVESTMENTS20132014a. The partners agreed to share income equally. *For Edi Thomas:2013:(17)2014:(18)DISTRIBUTION OF INCOME SHARED EQUALLY20132014For George Lopez:For Edi Thomas:2013:(19)2013:(13)2014:(20)2014:(14)TotalsP 675,000.00P 580,000.00For George Lopez:2013:(15)(16)2014:TotalsP 675,000.00 P 580,000.00b. The partners failed to agree on an income-sharing arrangement. *

Note: As per our guidelines, we will solve the first three subparts for you. 1. Account Titles…

In January 2013, Edi Thomas and George Lopez agreed to produce and sell chocolate candies under the company name T&L Chocolates. Thomas contributed P580,000 in cash to the business. Lopez contributed the building and equipment, valued at P480,000 and P230,000, respectively. The partnership had an income of P675,000 during 2013 but was less successful during 2014, when income was only P580,000. JOURNAL ENTRIES DEBIT CREDIT (2) (1) (3) (4) Initial investment of Edi Thomas in T&L Chocolates. (5) (6) (7) (8) (9) (10) (11) (12) Initial investment of George Lopez in T&L Chocolates. 2. Determine the share of income for each partner in 2013 and 2014 under each of the following conditions: c. The partners agreed to share income according to the ratio of their original investments. DISTRIBUTION OF INCOME BASED ON RATIO OF INITIAL INVESTMENTS a. The partners agreed to share income equally. * 2013 2014 For Edi Thomas: 2013: (17) DISTRIBUTION OF INCOME SHARED EQUALLY 2014: (18) 2013 2014 For George Lopez: For Edi Thomas: 2013: 2013: (13) (19) 2014: 2014: (14) (20) For George Lopez: Totals ℗ 675,000.00 P 580,000.00 2013: (15) 2014: (16) Totals P 675,000.00 P 580,000.00

In January 2013, Edi Thomas and George Lopez agreed to produce and sell chocolate candies under the company name T&L Chocolates. Thomas contributed P580,000 in cash to the business. Lopez contributed the building and equipment, valued at P480,000 and P230,000, respectively. The partnership had an income of P675,000 during 2013 but was less successful during 2014, when income was only P580,000. JOURNAL ENTRIES DEBIT CREDIT (2) (1) (3) (4) Initial investment of Edi Thomas in T&L Chocolates. (5) (6) (7) (8) (9) (10) (11) (12) Initial investment of George Lopez in T&L Chocolates. 2. Determine the share of income for each partner in 2013 and 2014 under each of the following conditions: c. The partners agreed to share income according to the ratio of their original investments. DISTRIBUTION OF INCOME BASED ON RATIO OF INITIAL INVESTMENTS a. The partners agreed to share income equally. * 2013 2014 For Edi Thomas: 2013: (17) DISTRIBUTION OF INCOME SHARED EQUALLY 2014: (18) 2013 2014 For George Lopez: For Edi Thomas: 2013: 2013: (13) (19) 2014: 2014: (14) (20) For George Lopez: Totals ℗ 675,000.00 P 580,000.00 2013: (15) 2014: (16) Totals P 675,000.00 P 580,000.00

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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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

d. The partners agreed to share income by allowing interest of 12
percent on their original investments and dividing the remainder
equally.
DISTRIBUTION OF INCOME BASED ON INTEREST ON INVESTMENTS AND
REMAINDER SHARED EQUALLY
2013
Income of Partner Income Distributed
P
675,000.00
Total Income for Distribution
Distribution of Interest:
George Lopez
(21)
Edi Thomas
(22)
(23)
(24)
Remaining Income After Interest
Equal distribution of remaining income:
George Lopez
(25)
Edi Thomas
(26)
w
Remaining income
Income of Partners
(29)
(30)
(27)
(28)
P 675,000.00
Income Distributed
580,000.00
2014
Income of Partner
Total Income for Distribution
P
Distribution of Interest:
George Lopez
(31)
Edi Thomas
(32)
(33)
(34)
Remaining Income After Interest
Equal distribution of remaining income:
George Lopez
(35)
(36)
Edi Thomas
Remaining income
Income of Partners
(37)
(38)
Edi Thomas
Remaining income
580,000.00 Income of Partners
(39)
(40)
P
3. What are some of the factors that need to be considered in choosing
the plan of partners' income sharing among the options shown in
requirement 2?
e. The partners agreed to share income by allowing salaries of P83,000
for Thomas and P60,000 for Lopez, and dividing the remainder by 60
percent for Thomas and 40% for Lopez.
DISTRIBUTION OF INCOME BASED ON AGREED AMOUNT OF SALARY PER
PARTNER WITH THE REMAINDER SHARED ON SEPCIFIC PERCENTAGES.
2013
Income of Partner Income Distributed
Total Income for Distribution
P
675,000.00
Distribution of Salaries:
George Lopez
(41)
Edi Thomas
(42)
(43)
(44)
Remaining Income After Salaries
Distribution of remaining income:
George Lopez
(45)
(46)
(49)
Edi Thomas
Remaining income
Income of Partners
2014
Total Income for Distribution
Distribution of Salaries:
George Lopez
(50)
Income of Partner
(47)
(48)
P
675,000.00
Income Distributed
P
580.000.00
(51)
Edi Thomas
(52)
(53)
(54)
Remaining Income After Salaries
Distribution of remaining income:
George Lopez
(55)
(56)
(57)
(58)
(59)
(60)
580,000.00
P
f. The partners agreed to share income by paying salaries of $80,000
to Thomas and P56,000 to Lopez, allowing interest of 10.5 percent on
their original investments, and dividing the remainder by 60 percent for
Thomas and 40% for Lopez.
DISTRIBUTION OF INCOME BASED ON AGREED AMOUNT OF SALARY PER
PARTNER, INTEREST ON INITIAL INVESTMENT AND THE REMAINDER ON
SPECIFIC PERCENTAGES.
2013
Income of Partner
Income Distributed
P
675,000.00
Total Income For Distribution
Distribution of Salaries:
George Lopez
(61)
Edi Thomas
(62)
(63)
Remaining Income After Salaries
(64)
Distribution of Interest:
George Lopez
(65)
Edi Thomas
(66)
(67)
Remaining Income After Salaries and Interest
Distribution of Remaining Amount:
George Lopez
(68)
Edi Thomas
(69)
(70)
Remaining income
Income of Partners
(72)
(73)
Income of Partner
(71)
P
675,000.00
Income Distributed
580,000.00
2014
P
Total Income For Distribution
Distribution of Salaries:
George Lopez
(74)
Edi Thomas
(75)
(76)
Remaining Income After Salaries
(77)
Distribution of Interest:
George Lopez
(78)
Edi Thomas
(79)
(80)
Remaining Income After Salaries and Interest
Distribution of Remaining Amount:
(81)
(82)
(83)
George Lopez
Edi Thomas
Remaining income
Income of Partners
(84)
(85)
(86)
580,000.00

In January 2013, Edi Thomas and George Lopez agreed to produce and sell chocolate candies
under the company name T&L Chocolates. Thomas contributed P580,000 in cash to the business.
Lopez contributed the building and equipment, valued at P480,000 and P230,000, respectively.
The partnership had an income of P675,000 during 2013 but was less successful during 2014,
when income was only P580,000.
JOURNAL ENTRIES
CREDIT
DEBIT
(2)
(1)
(3)
(4)
Initial investment of Edi Thomas in T&L Chocolates.
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Initial investment of George Lopez in T&L Chocolates.
2. Determine the share of income for each partner in 2013 and 2014 under
each of the following conditions:
c. The partners agreed to share income according to the ratio of their
original investments.
DISTRIBUTION OF INCOME BASED ON RATIO OF INITIAL
INVESTMENTS
2013
2014
a. The partners agreed to share income equally. *
For Edi Thomas:
2013:
(17)
2014:
(18)
DISTRIBUTION OF INCOME SHARED EQUALLY
2013
2014
For George Lopez:
For Edi Thomas:
2013:
(19)
2013:
(13)
2014:
(20)
2014:
(14)
Totals
P 675,000.00
P 580,000.00
For George Lopez:
2013:
(15)
(16)
2014:
Totals
P 675,000.00 P 580,000.00
b. The partners failed to agree on an income-sharing arrangement. *

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