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    Profit Distribution in Partnerships

    Uploaded by

    Lili Oh
    The JBC Partnership earned profits of P575,500 for the year. Joi, Boi, and Choi have capital account balances of P1,000,000, P620,000, and P725,000 respectively based on investments and withdrawals. Profits will be distributed as follows: 12% interest on average capital of P824,999, P552,500, and P650,833 for each partner; a 30% bonus of profits for Joi as managing partner of P132,808; salary allowances of P100,000, P80,000, P60,000; with remaining profits of P40,708 split 50%, 30%, 20% respectively.

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    Profit Distribution in Partnerships

    Uploaded by

    Lili Oh
    49 views3 pages
    The JBC Partnership earned profits of P575,500 for the year. Joi, Boi, and Choi have capital account balances of P1,000,000, P620,000, and P725,000 respectively based on investments and withdrawals. Profits will be distributed as follows: 12% interest on average capital of P824,999, P552,500, and P650,833 for each partner; a 30% bonus of profits for Joi as managing partner of P132,808; salary allowances of P100,000, P80,000, P60,000; with remaining profits of P40,708 split 50%, 30%, 20% respectively.

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    The JBC Partnership earned profits of P575,500 for the year. Joi, Boi, and Choi have capital account balances of P1,000,000, P620,000, and P725,000 respectively based on investments and withdrawals. Profits will be distributed as follows: 12% interest on average capital of P824,999, P552,500, and P650,833 for each partner; a 30% bonus of profits for Joi as managing partner of P132,808; salary allowances of P100,000, P80,000, P60,000; with remaining profits of P40,708 split 50%, 30%, 20% respectively.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    49 views3 pages

    Profit Distribution in Partnerships

    Uploaded by

    Lili Oh
    The JBC Partnership earned profits of P575,500 for the year. Joi, Boi, and Choi have capital account balances of P1,000,000, P620,000, and P725,000 respectively based on investments and withdrawals. Profits will be distributed as follows: 12% interest on average capital of P824,999, P552,500, and P650,833 for each partner; a 30% bonus of profits for Joi as managing partner of P132,808; salary allowances of P100,000, P80,000, P60,000; with remaining profits of P40,708 split 50%, 30%, 20% respectively.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    A.

    Joi, Boi and Choi are young professionals who organized JBC Partnership, a buy-n-sell business of used
    cars with profit sharing ratio of 50:30:20 respectively. As of December 31, 2019, the capital accounts of
    partners were:

    During the first year of operations, the partnership profits amounted to P575,500. The partners agreed that
    Profits will be distributed as follows:
    1. 12% interest will be given to each partner based on Average Capital balances;
    2. Joi will serve as the Managing Partner and will be given a bonus of 30% of profit after bonus.
    3. Salary allowances of the partners were as follows:
    Joi P100,000
    Boi 80,000
    Choi 60,000
    4. Remaining balances shall be distributed to : Joi 50%; Boi 30%; Choi 20%

    REQUIRED: 1) Prepare a table for computation of Average Capital balances.


    2) Prepare Profit Distribution table
    3)Prepare journal entries to record profits allocated to each partner.
    4) Prepare the statement of changes in Owners Equity of the partnership.

    Page 1 of 1
    JBC PARTNERSHIP
    COMPUTATION FOR AVE. CAPITAL BALANCES
    For the Year Ended Dec 1, 2016

    JOI, CAPITAL

    Date Capital Account Portion of the year Average Capital


    Balances unchanged Balances
    Jan 1 P700,000 4/12 P 233,333
    May 1 800,000 2/12 133,333
    Jul 1 750,000 2/12 125,000
    Sept 1 1,000,000 4/12 333,333
    AVERAGE CAPITAL P 824,999

    BOI, CAPITAL
    Jan 1 550,000 3/12 P 137,500
    April 1 470,000 3/12 117,500
    July 1 590,000 1/12 49,167
    August 1 560,000 2/12 93,333
    Oct 1 620,000 3/12 155,000
    AVERAGE CAPITAL P 552,500
    CHOI, CAPITAL
    Jan 1 650,000 5/12 P 270,833
    June 1 550,000 2/12 91,667
    Aug 1 720,000 1/12 60,000
    Sept 1 645,000 2/12 107,500
    Nov 1 725,000 2/12 120,833
    AVERAGE CAPITAL P 650,833

    TOTAL AVERAGE CAPITAL P2,028,332

    JBC PARTNERSHIP
    Profit Distribution Table
    For the year ended Dec 31, 2016

    JOI BOI CHOI TOTAL

    12% interests base


    on average capital
    P824,999 x 12% P99,000
    552,500 x 12% P66,300
    650,833 x 12% P78,100
    Sub total
    P243,400
    Bonus of 30% of profit
    after bonus to MP 132,808
    132,808
    Salary Allowances 100,000 80,000 60,000 240,000
    Sub-Total
    616,208
    REMAINDER: 50%:30%:20%
    P575,500-616,208
    =(P40,708)
    Page 2 of 2
    J=50% x P40,708 (20,354)
    B=30% x 40,708 (12,212)
    C=20% x 40,708 (8,142) (40,708)

    SHARE IN THE
    PROFIT P311,454 P134,088 P129,958 P575,500

    Journal Entry:
    Income Summary P575,500
    Joi, Drawing P311,454
    Boi, Drawing 134,088
    Choi, Drawing 129,958
    To divide profits among partners.

    (30% to JOI)

    Profit before bonus 575,500 130%


    Profit after bonus (575,500/130%) 442,692 100%
    Bonus P 132,808 30%

    JBC PARTNERSHIP
    Statement of Changes in Partner’s Equity
    For the Year Ended December 31, 2016

    JOI BOI CHOI TOTAL

    Original Investments P 700,000 P 550,000 P 650,000 P 1,900,000


    Add: Additional Investments 350,000 180,000 250,000 780,000
    Total P 1,050,000 P 730,000 P 900,000 2,680,000
    Less: Permanent Withdrawals 50,000 110,000 175,000 335,000
    Balances P 1,000,000 P 620,000 P 725,000 2,345,000
    Add: Profit 311,454 134,088 129,958 575,500
    Total 1,311,454 754,088 854,958 2,920,500
    Less: Temporary Withdrawals 0 0 0 0___
    Partner’s Capital,, End P1,311,454 754,088 854,958 2,920,500

    Page 3 of 3

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