Daniel, Capital P360,000 Nathan, Capital According to the partnership agreement, all profits and losses will be distributed as follows: • Daniel will be allowed an annual salary of P240,000 while Nathan will be allowed a monthly salary of P28,000; P180,000 The partners will be allowed with interest equal to 15% of the capital balance as of the first day of the year, Nathan will be allowed a bonus of 12% of net income after bonus; The remainder will be divided equally; and • Each partner is allowed to withdraw up to P18,000 on the first year and up to P24,000 the following year and for the next three years. Assume that the results of operations in 2017 from the date of formation is P140,000 net income and P70,000 net oss the following year. Assume further that each partner withdrew the maximum amount from the business each period. Which of the following statement is INCORRECT? A. There is a net increase of P24,375 in the capital of Daniel from beginning to end of 2017. B. The capital balance of Nathan at the end of first year is P259,625. C. The capital balance of Daniel at the end of 2018 is P310,731.25. D. The share of Nathan in the net loss in 2018 is a credit to capital of P3,643.75.
Daniel, Capital P360,000 Nathan, Capital According to the partnership agreement, all profits and losses will be distributed as follows: • Daniel will be allowed an annual salary of P240,000 while Nathan will be allowed a monthly salary of P28,000; P180,000 The partners will be allowed with interest equal to 15% of the capital balance as of the first day of the year, Nathan will be allowed a bonus of 12% of net income after bonus; The remainder will be divided equally; and • Each partner is allowed to withdraw up to P18,000 on the first year and up to P24,000 the following year and for the next three years. Assume that the results of operations in 2017 from the date of formation is P140,000 net income and P70,000 net oss the following year. Assume further that each partner withdrew the maximum amount from the business each period. Which of the following statement is INCORRECT? A. There is a net increase of P24,375 in the capital of Daniel from beginning to end of 2017. B. The capital balance of Nathan at the end of first year is P259,625. C. The capital balance of Daniel at the end of 2018 is P310,731.25. D. The share of Nathan in the net loss in 2018 is a credit to capital of P3,643.75.
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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Transcribed Image Text:11. Daniel and Nathan are partners of For Your Purpose Company. It begins its first year of operations on June 1, 2017
with the following capital balances:
Daniel, Capital
Nathan, Capital
P180,000
According to the partnership agreement, all profits and losses will be distributed as follows:
.
Daniel will be allowed an annual salary of P240,000 while Nathan will be allowed a monthly salary of
P28,000;
P360,000
• The partners will be allowed with interest equal to 15% of the capital balance as of the first day of the year,
Nathan will be allowed a bonus of 12% of net income after bonus;
The remainder will be divided equally; and
.
• Each partner is allowed to withdraw up to P18,000 on the first year and up to P24,000 the following year
and for the next three years.
Assume that the results of operations in 2017 from the date of formation is P140,000 net income and P70,000 net
loss the following year. Assume further that each partner withdrew the maximum amount from the business each
period.
Which of the following statement is INCORRECT?
A. There is a net increase of P24,375 in the capital of Daniel from beginning to end of 2017.
B. The capital balance of Nathan at the end of first year is P259,625.
C. The capital balance of Daniel at the end of 2018 is P310,731.25.
D. The share of Nathan in the net loss in 2018 is a credit to capital of P3,643.75.
11
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