Toys for the Big Boys is a partnership that sells sporting goods. The partnership agreement provides for 10% interest on invested capital; salaries of P240,000 to Alvaro and P280,000 to Yacapin; and bonus for Alvaro. The 2019 capital accounts were as follows: Alvaro, Capital Yacapin Capital 8/1 150,000 1/1 500,000 7/1 100,000 1/1 700,000 4/1 50,000 9/1 225,000 Required: For each of the following independent situations, prepare the profit distribution schedule: Interest is based on average capital balances. The bonus is 5% and is calculated on profit after bonus. In 2019, profit was P642,600. Any remainder is divided between Alvaro and Yacapin in a 3:2 ratio, respectively. Interest is based on ending capital balances after deducting salaries, which the partners normally withdraw during the year. The bonus is 8% and is calculated on profit after bonus and salaries. Profit was P1,087,000. Any remainder is divided equally. 3. Interest is based on beginning capital balances. The bonus is 12.5% and is calculated on profit after bonus. Profit was P769,500. Any remainder is divided between Alvaro and Yacapin in a 4:2 ratio, respectively.
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.
Distribution of
Toys for the Big Boys is a
Alvaro, Capital Yacapin Capital
8/1 150,000 1/1 500,000 7/1 100,000 1/1 700,000
4/1 50,000 9/1 225,000
Required:
For each of the following independent situations, prepare the profit distribution schedule:
- Interest is based on average capital balances. The bonus is 5% and is calculated on profit after bonus. In 2019, profit was P642,600. Any remainder is divided between Alvaro and Yacapin in a 3:2 ratio, respectively.
- Interest is based on ending capital balances after deducting salaries, which the partners normally withdraw during the year. The bonus is 8% and is calculated on profit after bonus and salaries. Profit was P1,087,000. Any remainder is divided equally.
3. Interest is based on beginning capital balances. The bonus is 12.5% and is calculated on profit after bonus. Profit was P769,500. Any remainder is divided between Alvaro and Yacapin in a 4:2 ratio, respectively.
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