Answered: JJ and KK are partners who share…

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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Question

JJ and KK are partners who share profits and losses in the ratio of 60% and 40%, respectively. JJ’s salary is P60,000 and P30,000 for KK. The partners are also paid interest on their average capital balances. In 2015, JJ received P30,000 of interest and KK, P12,000. The profit and loss allocation is determined after deductions for the salary and interest payments. If KK’s share in the residual income was P60,000 in 2015, what was the total partnership income?

A. 192,000

B. 345,000

C. 282,000

D. 387,000

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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