Answered: Partners Fojas and Gomez share profits…

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

Partners Fojas and Gomez share profits and loss equally after each has been credited in all circumstances with annual salary allowances of P30,000 and P24,000, respectively. Under this arrangement, in which of the following circumstances will Fojas benefit by P6,000 more than Gomez?

Only if the partnership has earnings of at least P6,000 for the year

Only if the partnership does not incur a loss for the year

Only if the partnership has earnings of P54,000 or more for the year

In all earnings or loss situation

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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