Problem #2 Striaton Café has three partners: Cilan, Chili, and Cress. On January 1, 2021, the three partners had equity of P250,000, P50,000, and P140,000, respectively. Cilan contributed an additional P50,000 on July 1, 2021. Chili received an annual salary allowance of P88,250 during 2021. The partners' equity accounts are also credited with 10% interest based on average capital balances. Any remaining profit is to be shared in a ratio of 4:3:3. The 2021 profit was P316,000. Amounts equal to the salary and interest allowances are required to be withdrawn by the partners every year-end. Required: a. Determine each partners' share in the profit b. Prepare the journal entries to close the income summary and withdrawals to the partner's equity accounts
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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