PROBLEM 19

Problem #19 Distribution of Profits or Losses Based on Partners' Agreement Toys for the Big Boys is a partnership that sells sporting goods. The partnership agreement provides for 10% interest on invested capital, salaries of P240,000 to Alvaro and P280,000 to Yacapin; and bonus for Alvaro. The 2019 capital accounts were as follows: Alvaro, Capital 150,000 1/1 4/1 Yacapin, Capital 100,000 1/1 7/1 8/1 500,000 50,000 9/1 700,000 225,000 Required: For each of the following independent situations, prepare the profit distribution schedule: 1. Interest is based on average capital balances. The bonus is 5% and is calculated on profit after bonus. In 2019, profit was P642,600. Any remainder is divided between Alvaro and Yacapin in a 3:2 ratio, respectively. 2. Interest is based on ending capital balances after deducting salaries, which the partners normally withdraw during the year. The bonus is 8% and is calculated on profit after bonus and salaries. Profit was P1,087,000. Any remainder is divided equally. 3. Interest is based on beginning capital balances. The bonus is 12.5% and is calculated on profit after bonus. Profit was P769,500. Any remainder is divided between Alvaro and Yacapin in a 4:2 ratio, respectively