Problem 32: Pam and Drix formed a partnership in 20x1 to operate a bookkeeping services. Pam contributed the initial capital while Drix managed the business. With the assistance of their consultants, they have arrived at the following agreement: 1. Each partner is allowed to withdraw P1,000 in cash from business every month. Any withdrawal in excess of that figure will be accounted for as a direct reduction to the partners' capital balance. 2. Partnership profits and losses will be allocated each year according to the following plan: Interest of 15% will be accrued by each partner based on the monthly average capital balance for the year. As the managing partner, Drix is to receive credit for a bonus equal to 20% of the year's net income. Any remaining profit or loss will be divided equally between the two partners. Pam and Drix begin the year of 20x1 with capital balances of P150,000 and P30,000, respectively. On April 1 of the year, Pam invested additional P8,000 cash in the business, while on July 1, Drix withdraws P6,000 in excess of the specified drawing allowance. The partners withdraw the amount of cash allowed every month. The partnership reports net income of P30,000 for 20x1. The amount of capital balances of Pam and Drix on December 31, 20x1 will be: a. P167,675; P20,325 b. P155,675; P26,325 c. P158,000; P14,000 d. P159,675; P22,325
Problem 32: Pam and Drix formed a partnership in 20x1 to operate a bookkeeping services. Pam contributed the initial capital while Drix managed the business. With the assistance of their consultants, they have arrived at the following agreement: 1. Each partner is allowed to withdraw P1,000 in cash from business every month. Any withdrawal in excess of that figure will be accounted for as a direct reduction to the partners' capital balance. 2. Partnership profits and losses will be allocated each year according to the following plan: Interest of 15% will be accrued by each partner based on the monthly average capital balance for the year. As the managing partner, Drix is to receive credit for a bonus equal to 20% of the year's net income. Any remaining profit or loss will be divided equally between the two partners. Pam and Drix begin the year of 20x1 with capital balances of P150,000 and P30,000, respectively. On April 1 of the year, Pam invested additional P8,000 cash in the business, while on July 1, Drix withdraws P6,000 in excess of the specified drawing allowance. The partners withdraw the amount of cash allowed every month. The partnership reports net income of P30,000 for 20x1. The amount of capital balances of Pam and Drix on December 31, 20x1 will be: a. P167,675; P20,325 b. P155,675; P26,325 c. P158,000; P14,000 d. P159,675; P22,325
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Problem 32: Pam and Drix formed a partnership in 20x1 to operate a
bookkeeping services. Pam contributed the initial capital while Drix managed
the business. With the assistance of their consultants, they have arrived at the
following agreement:
1. Each partner is allowed to withdraw P1,000 in cash from business every
month. Any withdrawal in excess of that figure will be accounted for as a
direct reduction to the partners' capital balance.
2. Partnership profits and losses will be allocated each year according to the
following plan:
Interest of 15% will be accrued by each partner based on the monthly
average capital balance for the year.
As the managing partner, Drix is to receive credit for a bonus equal to
20% of the year's net income.
Any remaining profit or loss will be divided equally between the two
partners.
Pam and Drix begin the year of 20x1 with capital balances of P150,000 and
P30,000, respectively. On April 1 of the year, Pam invested additional P8,000
cash in the business, while on July 1, Drix withdraws P6,000 in excess of the
specified drawing allowance. The partners withdraw the amount of cash allowed
every month. The partnership reports net income of P30,000 for 20x1.
The amount of capital balances of Pam and Drix on December 31, 20x1 will be:
a. P167,675; P20,325
b. P155,675; P26,325
c. P158,000; P14,000
d. P159,675; P22,325
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education