Loren and Carmela share profits after the provision of annual salary allowances of P14,400 and P13,200, respectively in the ratio of 6:4. However, its partnership’s net income is insufficient to provide for said allowances in full amount, the net income shall be divided equally between the partners. In 2020, the following errors were discovered: Depreciation for 2020 is understated by P2,100, and the inventory on December 31, 2020 is overstated by P11,400. The partnership net income for 2020 was reported to be P19,500.
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.
Loren and Carmela share profits after the provision of annual salary allowances of P14,400
and P13,200, respectively in the ratio of 6:4. However, its partnership’s net income is
insufficient to provide for said allowances in full amount, the net income shall be divided
equally between the partners. In 2020, the following errors were discovered:
for 2020 is understated by P2,100, and the inventory on December 31, 2020 is overstated by
P11,400. The partnership net income for 2020 was reported to be P19,500.
The capital accounts of the partners should be increased (decreased) by:
a. Loren, P (6,540); Carmela, P (6,540) c. Loren, P (6,960); Carmela, P 6,540
b. Loren, P 3,000; Carmela, P 3,000 d. Loren, P (6,750); Carmela, P (6,750)
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
