Question
With Explanation each question, on how did you get the answer. Toys for the Big Boys is a partnership that sells sporting goods. The partnership
With Explanation each question, on how did you get the answer.
Toys for the Big Boys is a partnership that sells sporting goods. The partnership agreement provides for
10% interest on invested capital; salaries of P 240,000 to Alvaro and P 280,000 for Yacapin and bonus for Alvaro. The 2019 capital accounts are as follows;
ALVARO, CAPITAL: 1/1 Investment 4/1 Investment
YACAPIN CAPITAL
P 500,000 50,000 150,000
1/1 Investment 7/1 Drawing
P 700,000 100,000 225,000
8/1 Drawings
Required:
For each of the following INDEPENDENT SITUATIONS, prepare the profit distribution schedule:
9/1 Investment
1) Interest is based on average capital balances. The bonus is 5% and is calculated on profit after bonus. In 2019, profit was P 642,600. 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 P 1,087,000. 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 P 769,500. Any remainder is divided between Alvaro and Yacapin in a 4:2 ratio respectively.
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