Concept explainers
Allocation of
The preparation of income distribution when weighted average capital balance, and bonus is calculated after deducting the bonus.
Allocation of profit and loss to partners: Allocation of profit and loss to partners will be in accordance with partnership agreement. If the entity does not have formal partnership agreement, section 401 of the UPA 1997 indicates that profit and losses are distributed equally among partners. Profit distributions are not included in the partnership’s income statement, but recorded directly into partner’s capital accounts, not treated as expense items.
The preparation of income distribution schedule when interest is based on ending capital after deducting salaries.
Allocation of profit and loss to partners: Allocation of profit and loss to partners will be in accordance with partnership agreement. If the entity does not have formal partnership agreement, section 401 of the UPA 1997 indicates that profit and losses are distributed equally among partners. Profit distributions are not included in the partnership’s income statement, but recorded directly into partner’s capital accounts, not treated as expense items.
The preparation of income distribution schedule using the given information.
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Chapter 15 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Scenario B: Partners A, B, and C operate a business with profit sharing agreement ratios of 5: 3:2, and capital balances of $300,000, $200,000, and $100,000 respectively. The total income for the year is $180,000. Each partner receives a fixed salary of $50, 000, and they are entitled to earn 10% interest on their capital balances. Calculate the total income allocated to Partnerarrow_forwardA, B, and C of ABC Partnership have beginning capital balances of P500,000, P300,000, and P200,000 respectively. The partnership has the following information: Sales (60% credit; 40% cash) amounting to P1,200,000, Cost of Goods Sold, P920,000, and Total operating expenses is P218,000. In their profit-sharing arrangement: . Salaries of P15,000, P20,000, and P25,000 shall be given to each partner respectively . Interest at 3% of the beginning capital balances would be allowed in profit distribution. . Any remaining amount will be divided among each partner at 3:1:1. Compute the share of C in the net profit (loss). Encode as a negative amount if the answer is negative.arrow_forwardPartners A, B, and C have a profit and loss agreement with the following provisions: salaries of $13,000 and $12,000 for A and C, respectively; a bonus to C of 10% of net income after bonus; and interest of 6% on ending capital in excess of $100,000. Ending capital balance is $80,000 for A, $150,000 for B, and $110,000 for C. Remaining profit/loss is allocated to A, B, C in the ratio of 2:1:1. If the partnership had net income of $22,000, how much should be allocated to Partner C? a. 12,450 b. 14,600 c. 8,700 d. 850arrow_forward
- Partners A, B, and C have a profit and loss agreement with the following provisions: salaries of $13,000 and $12,000 for A and C, respectively; a bonus to C of 10% of net income after bonus; and interest of 6% on ending capital in excess of $100,000. Ending capital balance is $80,000 for A, $150,000 for B, and $110,000 for C. Remaining profit/loss is allocated to A, B, C in the ratio of 2:1:1. If the partnership had net income of $22,000, how much should be allocated to Partner C? Select one: 14,600 8,700 850 12,450arrow_forwardThe partnership contract of Robert Florence and Karen Partnership provided for the sharing of net income and losses as follows:A) Salaries of $30,000 to Robert, $28,000 to Florence and $26,000 to Karen.B) Interest of 10% a year on average capital balances.C) Any residual income or loss in the ration of 3:5:2 to Robert, Florence, and Karen respectively. The net income for the year is $140,000. The average capital balances were $60,000 for Robert, $40,000 for Florence and $100,000 for Karen. Prepare a journal entry to distribute the profit. Show details of the calculation in the space provided.arrow_forwardItem Nos. 20 and 21 are based on the following information: In its first year of operations, the partnership of Li, Kwan, and Yu earned a profit of P 300,000 before providing salaries of P 60,000 and P 40,000 per annum for Li and Kwan, respectively. Their capital contributions and profit and loss sharing ratio are as follows: Capital Profit & Loss Ratio Li P 500,000 40% Kwan -- 300,000 30% Yu - 200,000 30% Total--- P 1,000,000 100% 20. How much of the profit should be distributed to Kwan? a. P 60,000. c. P 140,000. b. P 100,000. d. P 150,000.arrow_forward
- Jpea, Jic, and Jfenix formed a partnership and named it ESBIEYEY. At the end of the year, the partnership earned a profit of P 1,000,000. The capital balances areP 250,000, P 280,000, and P 270,000 for Jpea, Jic, and Jfenix, respectively. The partners agreed to distribute the profit as follows: • Interest to ending capital of 10% will be given Jpea and Jic will be given a salary amounting to P 150,000 each Jfenix will be given a bonus of 10% of net income after interest, salary and bonus • Remaining profit is to be distributed equally 26. How much is the bonus given to Jfenix? c. P 67,000 d. P 60,909 а. р 62,000 b. Р 56, 364 27. How much is Jpea's share in net income? a. P 364,879 b. P 360,879 c. P 365, 879 d. P 362,879 28. How much is Jic's share in net income? a. P 364,879 b. P 360,879 c. P 365,879 d. P 362,879arrow_forwardItem Nos. 20 and 21 are based on the following information: In its first year of operations, the partnership of Li, Kwan, and Yu earned a profit of P 300,000 before providing salaries of P 60,000 and P 40,000 per annum for Li and Kwan, respectively. Their capital contributions and profit and loss sharing ratio are as follows: Capital Profit & Loss Ratio Li - P 500,000 40% Kwan 300,000 30% Yu 200,000 30% Total-- P 1,000,000 100% 20. How much of the profit should be distributed to Kwan? P 140,000. a. P 60,000. C. b. P 100,000. d. P 150,000.arrow_forwardA and B are partners sharing Profit and Loss in the ratio of 3:2. The Profit for the year was RO 25000. The commission was paid to partners @ 10%. Calculate Commission before charging. Calculate Commission after charging.arrow_forward
- Arnold (A), Bower (B), and Chambers (C) are partners in a small manufacturing firm whose net assets are as follows: (attached)The partnership agreement calls for the allocation of profits and losses as follows:a. Salaries to A, B, and C of $30,000, $30,000, and $40,000, respectively.b. Bonus to A of 10% of net income after the bonus.c. Remaining amounts are allocated according to profit and loss percentages of 50%, 20%, and 30% for A, B, and C, respectively.Unfortunately, the business finds itself in difficult times: Annual profits remain flat at approximately $132,000, additional capital is needed to finance equipment which is necessary to stay competitive, and all of the partners realize that they could make more money working for someone else, with a lot fewer headaches.Chambers has identified Dawson (D) as an individual who might be willing to acquire an interest in the partnership. Dawson is proposing to acquire a 30% interest in the capital of the partnership and a revised…arrow_forwarddob Item Nos. 20 and 21 are based on the following information: In its first year of operations, the partnership of Li, Kwan, and Yu earned a profit of P 300,000 before providing salaries of P 60,000 and P 40,000 per annum for Li and Kwan, respectively. Their capital contributions and profit and loss sharing ratio are as follows: Capital Profit & Loss Ratio Li - P 500,000 40% Kwan 300,000 30% Yu -- 200,000 30% Total- P 1,000,000 100% 20. How much of the profit should be distributed to Kwan? 00 c. P 140,000. a. P 60,000. с. b. P 100,000. d. P 150,000. 21. If the proftit of P 300,000 was after treating the salaries as expenses, how much would be the share of Li in the total profit? Ted Jud С. P 120,000. a. P 60,000. а. b. P 100,000.0 d. P 180,000.000.0earrow_forwardThe partnership agreement of ABC partnership includes the following profit and loss sharing provisions: Salaries to partners B and C amounting to P5,000 per month 5% bonus to partner B based on profits after salaries and bonus Remainder to be allocated 2:2:1 At the end of current period, the partnership generated a net income of P100,000. Based on the information provided, how should the profit be distributed?arrow_forward
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
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