Problem 1 KC Cruz and JD Suarez are partners of Cebu Vintage Car. The income and expense summary account before final closing shows a credit balance of P500, 000 at the end of the fiscal year. The following were taken from their respective capital account ledgers: KC Cruz Jan. 1 Balance 750, 000 Oct. 1 Withdrawal 70, 000 Dec. 1 Investment 50, 000 JD Suarez Jan. 1 Balance 700, 000 March 1 Investment 80, 000 Nov. 1 Withdrawal 10, 000 Dec. 1 Investment 40, 000

Required: Show how profit is distributed to partners and journal entry to close the income and expense summary account under the following assumptions:

a. Annual salaries of P45, 000 and P30, 000 given to Cruz and Suarez; 10% interest based on beginning capital balance of each partner: Bonus to Suarez of 20% of profit after bonus and after salaries and remainder to be divided equally. b. 15% interest is allowed to partners based on the average capital balance; annual salaries to each partner, P50, 000 and P20, 000 respectively; Bonus to Suarez of 20% of profit after bonus, and balance for distribution is to be divided based on beginning capital balance. c. Annual salaries of P45, 000 and P30, 000; 8% interest based on ending capital balance of each partner: Bonus to Suarez of 20% of profit before bonus, after salaries, after interest and remainders to be divided based on arbitrary ratio of 3:2. d. Annual salaries of P120, 000 and P100, 000 respectively; Bonus to Suarez of 25% of profit before bonus , before salaries to both ; remainder is divided based on average capital ratio.