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13-28 | Financial Accounting and Reporting by Prof. WIN Balada
SECTION: PROFESSOR:
Problem #5
Rules for the Distribution of Profits or Losses
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:
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 2019 and 2020 under each of the
following conditions:
a. The partners agreed to share profit equally.
The partners failed to agree on.a profit-sharing arrangement.
The partners agreed to share profit according to the ratio of their original
investments.
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 P400,000 for
Marasigan and P280,000 for Asacta, and dividing the remainder equally.
f. 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. NAME: SCORE:
SECTION: © PROFESSOR:
Problem #9
Order of Priority
On Jan. 1; 2019, the Mones, Pitular and Tuazon Partnership was formed with initial
investments by the partners as follows:
Mones P2,000,000
Pitular™ 1,000,000
Tuazon 1,000,000
According to the partnership agreement, profit or loss is to be divided among the
partners as follows:
1. Salaries of P120,000 for Mones, P60,000 for Pitular and P60,000 for Tuazon.
2. Interest at 5% on the original capital balances.
3, The remainder to be divided among Mones, Pitular, and Tuazon in a ratio of [Link],
respectively.
The partnership reported profit of P350,000 for the year ended Dec. 31, 2019.
Required: ‘
Determine the partners’ share in the profit: under each of the following independent
situations: :
1. Partner’s salaries and interest on capital balances should be fully allocated and any
deficiency between these allocations and profit is to be divided among Mones,
Pitular, and Tuazon in the ratio [Link], respectively.
2. Partner's salaries and interest on capital balances should be made only to the extent
that the profit can provide.
