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Chapter 3 Case Part 2

The document describes the capital account balances of three partnerships - Rialubin, Rabena and Dela Cruz; Labasan, Gabayan, and Villanueva; and Alvaro and Yacapin - at various points in time. It then provides profit/loss distribution scenarios based on the partnerships' agreements, including interest, salaries, bonuses and how remaining profits/losses are divided. The scenarios require calculating the allocation of profits or losses to each partner based on the given assumptions.

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948 views3 pages

Chapter 3 Case Part 2

The document describes the capital account balances of three partnerships - Rialubin, Rabena and Dela Cruz; Labasan, Gabayan, and Villanueva; and Alvaro and Yacapin - at various points in time. It then provides profit/loss distribution scenarios based on the partnerships' agreements, including interest, salaries, bonuses and how remaining profits/losses are divided. The scenarios require calculating the allocation of profits or losses to each partner based on the given assumptions.

Uploaded by

grace
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Distribution or Profits or Losses Based on Partner’s Agreement

A summary of changes in the capital accounts of the Rialubin, Rabena and Dela Cruz
partnership for 2019, before closing, follows:
Rialubin Rabena Dela Cruz Total

Balance, Jan. 1,2019 P 80,000 P 80,000 P 90,000 P 250,000


Investment, Apr. 1 20,000 20,000
Withdrawal, May 1 (15,000) (15,000)
Withdrawal, July 1 (10,000) (10,000)
Withdrawal, Sept. 1 (30,000) (30,000)
P 90,000 P 65,000 P 60,000 P 215,000

Required:
Determine the allocation of the 2019 profit to the partners under each of the following
independent assumptions:
1. Profit is P48,000 and profit is divided on the basis of average capital balances.
2. Profit is P50,000. Rialubin receives a bonues of 10% of profit for managing the business, and
the balance to be divided on the basis of beginning capital balances.
3. Loss is P35,000, each partner is allowed 10% interest on beginning capital balances, and the
balance to be divided equally.
Distribution of Profits or Losses Based on Partner’s Agreement
Labasan, Gabayan, and Villanueva are manufacturer’s representatives in the architecture
business. Their capital accounts were as follows:
Labasan, Capital Gabayan, Capital Villanueva,Capital

9/1 80,000 1/1 300,000 3/1 90,000 1/1 400,000 8/1 120,000 1/1 500,000

5/1 60,000 7/1 50,000 4/1 70,000

9/1 40,000 6/1 30,000

Required:
For each of the following independent profit and loss agreement, prepare the profit distribution
schedule:
1. Salaries are P150,000 to Labasan, P200,000 to Gabayan, and P180,000 to Villanueva. Labasan
receives a bonus of 5% profit after bonus. Interest is 10% of ending capital balances. Labasan,
Gabayan, and Villanueva divide any remainder in a 3:3:4 ratio. Profit was P789,600.
2. Interest is 10% of average capital balances. Salaries are P240,000 to Labasan, P210,000 to
Gabayan, and P250,000 to Villanueva. Gabayan receives a bonus of 10% of profit after bonus
and salary. Any remainder is divided equally. Profit was P680,800
3. Villanueva receives a bonus of 20% of profit after bonus and salaries. Salaries are P210,000 to
Labasan, P180,000 to Gabayan, and P150,000 to Villanueva. Interest is 10% of beginning capital
balances. Labasan, Gabayan, and Villanueva divide any remainder in an 8:7:5 ratio. Profit was
P929,400
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 Yacapin Capital

8/1 150,000 1/1 500,000 7/1 100,000 1/1 700,000

4/1 50,000 9/1 225,000

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.

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