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Problem 3-4 (Division of Profit and Loss: Interest on Average Capital, Salaries and Bonus to Partners) Basa, Benito, Beltran and Bagnes own a publishing company
Problem 3-4 (Division of Profit and Loss: Interest on Average Capital, Salaries and Bonus to Partners) Basa, Benito, Beltran and Bagnes own a publishing company which they operate as a partnership. The partnership agreement includes the following: Basa receives a salary of P400,000 and a bonus of 3% of income after all bonuses Benito receives a salary of P200,000 and a bonus of 2% of income after all bonuses; All partners are to receive a 10% interest on their average capital balances. The average capital balances are as follows: Basa - P1,000,000; Benito - 900,000 Beltran - P400,000: Bagnes-P940,000; Any remaining profits are to be divided equally among the partners. Instructions: 1. Determine how a profit of P2,100,000 would be allocated among the partners. 2. Determine how a loss of P800,000 would be allocated among the partners, 3. Determine how a profit of P800,000 would be allocated among the partners assuming the following priority system: Income should be allocated by first giving priority to interest on invested capital, then bonuses, then salary and then according to the profit and loss percentages
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