On January 1 , FRED and GEMMO formed a partnership by contributing cash of P405,000 and P270,000 , respectively . On February 1. Fred contributed an additional P135,000 . On May 1 , Gemmo contributed machinery with a fair market value of P90,000 and a net book value of P75,000 when contributed . On November 1 Gemmo contributed an additional P45,000 cash to the partnership . The partnership reported a net income of P257,400 for the year and the profit or loss agreement are as follows: Interest at 6% is allowed on average capital balances Salaries if P2,700 per month to each partner Bonus to Fred of 10% of net income and Balance to be divided in the ratio of 6:4 to Fred and Gemmo , respectively Required: 1. Table showing the computation of average capital balances of each partner . 2. Schedule for the division of net profit for 2016 3. Journal Entries to record a . Entry upon formation A. Entry upon formation B. Additional formation C. Net Income D. Distribution of Income
On January 1 , FRED and GEMMO formed a partnership by contributing cash of P405,000 and P270,000 , respectively . On February 1. Fred contributed an additional P135,000 . On May 1 , Gemmo contributed machinery with a fair market value of P90,000 and a net book value of P75,000 when contributed . On November 1 Gemmo contributed an additional P45,000 cash to the partnership . The partnership reported a net income of P257,400 for the year and the profit or loss agreement are as follows: Interest at 6% is allowed on average capital balances Salaries if P2,700 per month to each partner Bonus to Fred of 10% of net income and Balance to be divided in the ratio of 6:4 to Fred and Gemmo , respectively Required: 1. Table showing the computation of average capital balances of each partner . 2. Schedule for the division of net profit for 2016 3. Journal Entries to record a . Entry upon formation A. Entry upon formation B. Additional formation C. Net Income D. Distribution of Income
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.
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On January 1 , FRED and GEMMO formed a partnership by contributing cash of P405,000 and P270,000 , respectively . On February 1. Fred contributed an additional P135,000 . On May 1 , Gemmo contributed machinery with a fair market value of P90,000 and a net book value of P75,000 when contributed . On November 1 Gemmo contributed an additional P45,000 cash to the partnership . The partnership reported a net income of P257,400 for the year and the profit or loss agreement are as follows: Interest at 6% is allowed on average capital balances Salaries if P2,700 per month to each partner Bonus to Fred of 10% of net income and Balance to be divided in the ratio of 6:4 to Fred and Gemmo , respectively Required: 1. Table showing the computation of average capital balances of each partner . 2. Schedule for the division of net profit for 2016 3. Journal Entries to record a . Entry upon formation
A. Entry upon formation
B. Additional formation
C. Net Income
D. Distribution of Income
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