On January 1, 2020, Benedict and Lord decided to form the partnership. At the end of the year, the partnership made a net income of P1,056,000 after allocation of partners’ interest. The capital accounts of the partnership show the following transactions. BENEDICT, CAP LORD, CAP DR CR DR CR JAN 1 - 400,000 - 250,000 APR 1 50,000 - - - JUNE 1 - - - 100,000 AUG 1 - 100,000 - - SEPT 1 - - 30,000 - OCT 1 - 50,000 10,000 - DEC 1 - 40,000 - 50,000 Assuming that the partners’ return on invested capital is 20% per annum, given on average capital for the year and the balance of profits is allocated equally, the allocation of profits should be: A. 1,212,000 988,000 C. 612,000 588,000 B. 712,000 488,000 D. 112,000 88,000
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.
On January 1, 2020, Benedict and Lord decided to form the
partnership made a net income of P1,056,000 after allocation of partners’ interest. The capital accounts of
the partnership show the following transactions.
BENEDICT, CAP LORD, CAP
|
|
DR |
CR |
DR |
CR |
|
JAN 1 |
- |
400,000 |
- |
250,000 |
|
APR 1 |
50,000 |
- |
- |
- |
|
JUNE 1 |
- |
- |
- |
100,000 |
|
AUG 1 |
- |
100,000 |
- |
- |
|
SEPT 1 |
- |
- |
30,000 |
- |
|
OCT 1 |
- |
50,000 |
10,000 |
- |
|
DEC 1 |
- |
40,000 |
- |
50,000 |
Assuming that the partners’
A. 1,212,000 988,000 C. 612,000 588,000
B. 712,000 488,000 D. 112,000 88,000
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