On January 1, 2018, A, B and C formed ABC Partnership with original capital contribution of P600,000, P1,000,000 and P400,000. A is appointed as managing partner. Read the data below. What is A's share in partnership profit for 2018? During 2018, A, B and C made additional investments of P1,000,000, P400,000, and P600,000,respectively. At the end of 2018, A, B and C made drawings of P400,000, P200,000 and P800,000respectively. At the end of 2018, the partnership had a credit balance in the income summary accountof P2,100,000. The profit or loss agreement of the partners is as follows:10% interest on original capital contribution of the partners• Quarterly salary of P80,000 and P20,000 for A and B, respectivelyBonus to A equivalent to 20% Net Income after interest and salary to all partnersRemainder is to be distributed equally among the partners.

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Answered: On January 1, 2018, A, B and C formed…

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter12: Accounting For Partnerships And Limited Liability Companies

Section: Chapter Questions

Problem 3PB

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On January 1, 2018, A, B and C formed ABC Partnership with original capital contribution of P600,000, P1,000,000 and P400,000. A is appointed as managing partner. Read the data below. What is A's share in partnership profit for 2018?

During 2018, A, B and C made additional investments of P1,000,000, P400,000, and P600,000,
respectively. At the end of 2018, A, B and C made drawings of P400,000, P200,000 and P800,000
respectively. At the end of 2018, the partnership had a credit balance in the income summary account
of P2,100,000. The profit or loss agreement of the partners is as follows:
10% interest on original capital contribution of the partners
• Quarterly salary of P80,000 and P20,000 for A and B, respectively
Bonus to A equivalent to 20% Net Income after interest and salary to all partners
Remainder is to be distributed equally among the partners.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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