f. The partners agreed to share income by paying salaries of $80,000 to Thomas and P56,000 to Lopez, allowing interest of 10.5 percent on their original investments, and dividing the remainder by 60 percent for Thomas and 40% for Lopez.
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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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- The following were the balance of the partnership between Reynolds and Wynter as at December 31, 2015. DR $ CR $ Capital on January 1, 2015 Reynolds 35,000 Wynter 35,000 Current accounts on January 1, 2015 Reynolds 1,700 Wynter 400 Drawings during the year Reynolds 8000 Wynter 6400 Land and building .........................................160 000 Equipment .......................................................15000 Cash and bank .................................................20000 Bank loan .................................................................. 90,000 Electricity ..........................................................1400 Office salaries .................................................40000…A Victoria fashion business partnership has agree that half of the annual profit be distributed in proportion to each partner's investment in the partnership, and that the other half be distributed in proportion to the total number of hours that each partner worked in the business during the year. In 2015, the profit of the company was $82,000. How should the company allocate this profit to its three investors if the amounts invested by Chloe, Arab, and Mike are $60,000, $20,000, and $50,000, and their hours of work for the year were 400, 1100, and 1300, respectively?Banayo and his very close fiend Buendia formed a partnership on January 1, 2009 with Banayo contributing P160,000 cash and Buendia contributing equipment with a book value of P64,000 and a fair value of P48,000, and inventory items with a book value of P24,000 and a fair value of P32,000. During 2009, Buendia made additional investment of P16,000 on April 1, and P16,000 on June 1. On September 1, he withdrew P40,000. Banayo had no additional investment nor withdrawals during the year. The average capital balance at the end of the fiscal year 2009 for Buendia
- Kai and her very close friend Bigan formed a partnership on January 1,2015 with Kain contributing P16,000 cash while Bigan contributing equipment with a book value of P6,400 and a fair value of P4,800 and inventory items with a book value of P2,400 and a fair value of P3,200. During 2015, Bigan made additional investments of P1,600 on April 1 and P1,600 on June 1 and on September 1, he withdrew P4,000. Kai had no additional investments or withdrawals during the year. How much is Bigan's average capital balance?In the early part of 2018, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2017 but had never used an accountant’s services. Hugh and Jacobs began the partnership by contributing $150,000 and $100,000 in cash, respectively. Hugh was to work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as follows: Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period. A compensation allowance of $5,000 was to go to Hugh with a $25,000 amount assigned to Jacobs. Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively. In 2017, revenues totaled $175,000, and expenses were $146,000 (not including the partners’ compensation allowance). Hugh withdrew cash of $9,000 during the year, and Jacobs took out $14,000. In addition, the business paid $7,500 for repairs…In January 2018, Nick Marasigan and Dems Asacta agreed to produce and sell chocolate candies. Marasigan contributed P2400000 in cash to the business. Asacta contributed the building and equipment, valued at P2200000 and P1400000, respectively. The partnership had profits of P840000 during 2018 but was less successful during 2019, when profit was only P400000.Required:1.Prepare the journal entry to record the investment of both partners in the partnership.2.Determine the share of profit for each partner in 2018 and 2019 under each of the following conditions:a.The partners agreed to share profit equally.b.The partners failed to agree on a profit-sharing arrangement.c.The partners agreed to share profit according to the ratio of their original investment.d.The partners agreed to share profits by allowing interest of 10% on their original investments and dividing the remainder equally.e.The partners agreed to share profits by allowing salaries of P400000 for Marasigan and P280000 for…
- On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $30,000, $58,000, and $60,000, respectively. Over the next three years, the business reported net income and (loss) as follows: 2017 . . . . . . . . . . . . . .. . . . . $70,000 2018 . . . . . . . . . . . . . . . . . . 42,000 2019 . . . . . . . . . . . . . . . . . . (25,000) During this period, each partner withdrew cash of $15,000 per year. Krause invested an additional $5,000 in cash on February 9, 2018.At the time that the partnership was created, the three partners agreed to allocate all profits and losses according to a specified plan written as follows:∙ Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year.∙ Because of prior work experience, Angela is entitled to an annual salary allowance of $12,000 per year and Diaz is entitled to an annual salary allowance of…Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O’Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O’Donnell invests a building worth $52,000 and equipment valued at $16,000 as well as $12,000 in cash. Although Reese makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances. To entice O’Donnell to join this partnership, Reese draws up the following profit and loss agreement: O’Donnell will be credited annually with interest equal to 20 percent of the beginning capital balance for the year. O’Donnell will also have added to his capital account 15 percent of partnership income each year (without regard for the preceding interest figure) or $4,000, whichever is larger. All remaining income is credited to Reese. The partnership reported a net loss of $10,000 during the first year of its…In January 2019. Nick Marasigan and Dems Asacta agreed to produce and sell chocolate candies. Marasigan contributed P2,400,000 in cash to the business. Asacta contributed the building and equipment, valued at P2,200,000 and P1.400,000, respectively. The partnership had profits of P840,000 during 2019 but was less successful during 2020, when profit was only P400,000. Required: d. The partners agreed to share profits by allowing interest of 10% on their original Investments and dividing the remainder equally The partners agreed to share profits by allowing salaries of P400,000 for Marasigan and P280,000 for Asacta, and dividing the remainder equally. The partners agreed to share profits by paying salaries of P400,000 to Marasigan and P280,000 to Asacta, allowing interest of 9% on their original investments. and dividing the remainder equally.
- Costello & Summers are partners in a merchandising business. During 2014, they withdrew their salary allowances of P 34,000 & P 59,000 respectively. Bonus is given to Summers based on 20% of net income after salaries but before bonus and the remaining profit & loss equally by Costello & Summers. The partners’ capital accounts show the following: COSTELLO SUMMERS Beginning Balance P 85,000 P 67,000 Additional Investments 40,000 43,000 Withdrawal other than salary allowance 35,000 20,000 What is Summer’s capital if Costello’s capital after dividing net income is P 138,800? a. P 201,750 b. P 163,200 c. P 158,320 d. P 155,067Rosa and Linda agreed to form a partnership on June 15, 2012 for the purpose of manufacturing and selling custom silver jewelry. Both are master crafters and have their own tools and equipment, which they will invest in the business. Rosa and Linda determined that their tools and equipment have fair market values of P90,000 and P120,000, respectively. They further resolved to invest sufficient cash such that each partner will have a beginning capital balance equal to P250,000. How much will be the total cash of the newly formed partnership?In the early part of 2018, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2017 but had never used an accountant’s services. Hugh and Jacobs began the partnership by contributing $90,000 and $40,000 in cash, respectively. Hugh was to work occasionally at the business, and Jacobs was to be employed full-time. They decided that year-end profits and losses should be assigned as follows: Each partner was to be allocated 10 percent interest computed on the beginning capital balances for the period. A compensation allowance of $7,000 was to go to Hugh with a $17,000 amount assigned to Jacobs. Any remaining income would be split on a 4:6 basis to Hugh and Jacobs, respectively. In 2017, revenues totaled $115,000, and expenses were $87,000 (not including the partners’ compensation allowance). Hugh withdrew cash of $6,000 during the year, and Jacobs took out $11,000. In addition, the business paid $7,500 for repairs made…