Four M Co., a partnership was formed on January 2016, with four partners, Joy, Ash, Elisha and Gabrielle. Capital contributions were as follows: Joy - P1,000,000; Ash P500,000; Elisha - P500,000; and Gabrielle - P500,000. The partnership agreement provides that each partner shall receive 5% interest on the amount of her capital contribution. In addition, Joy and Ash are to receive salaries of P100,000 and P60,000, respectively, which are to be charged as expenses of the business. The agreement further provides that Elisha shall receive a minimum of P120,000 per annum from the partnership, including amounts allowed as interest on capital and their respective shares of profits. The balance of the profits to be shared in the following proportions: Joy - 30%; Ash - 30%; Elisha - 20%; Joy - 20%. Calculate the amount that must be earned by the partnership during 2016, before any charge for interest on capital or partners' salaries, in order that Joy may receive an aggregate of P250,000, including interest, salary and share of profits. Show your solution. a. P646,667 b. P618,333 c. P285,000 d. cannot be determined
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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