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    Distribution of Profits or Losses Based On Partners

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    Mariel Mangalino Bautista
    The document describes the distribution of profits and losses between three partners - Parale, Demafelis, and Lopez - based on their capital investments and an agreed ratio. It provides calculations to determine how each partner's account would be affected by (a) a P405,000 profit, (b) a P270,000 profit, (c) a P315,000 loss, and (d) a P350,000 profit if distributed solely based on capital ratios.

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    Distribution of Profits or Losses Based On Partners

    Uploaded by

    Mariel Mangalino Bautista
    18 views12 pages
    The document describes the distribution of profits and losses between three partners - Parale, Demafelis, and Lopez - based on their capital investments and an agreed ratio. It provides calculations to determine how each partner's account would be affected by (a) a P405,000 profit, (b) a P270,000 profit, (c) a P315,000 loss, and (d) a P350,000 profit if distributed solely based on capital ratios.

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    Distribution of Profits or Losses Based on Partners

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    The document describes the distribution of profits and losses between three partners - Parale, Demafelis, and Lopez - based on their capital investments and an agreed ratio. It provides calculations to determine how each partner's account would be affected by (a) a P405,000 profit, (b) a P270,000 profit, (c) a P315,000 loss, and (d) a P350,000 profit if distributed solely based on capital ratios.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    18 views12 pages

    Distribution of Profits or Losses Based On Partners

    Uploaded by

    Mariel Mangalino Bautista
    The document describes the distribution of profits and losses between three partners - Parale, Demafelis, and Lopez - based on their capital investments and an agreed ratio. It provides calculations to determine how each partner's account would be affected by (a) a P405,000 profit, (b) a P270,000 profit, (c) a P315,000 loss, and (d) a P350,000 profit if distributed solely based on capital ratios.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    Distribution of Profits or

    Losses Based on Partners’


    Agreement
    Problem # 11
    Parale, Demafelis, and Lopez each receive a P70000 salary, as
    well as 15% interest on their respective average investment of
    P200000, P100000, and P400000. If they share remaining profits
    and losses in a 4:3:2 ratio, respectively, by how much would
    Lopez account increase or decrease (indicate a decrease by
    placing parentheses), assuming: (a) profit of P405000, (b) profit
    of P270000, and (c) loss of P315000. In addition, calculate (d)
    Lopez share of a P350000 profits if profit and loss distribution
    were based instead solely on the ratio of average capital
    investments.
    Parale, Demafelis, and Lopez each receive a P70000 salary,
    as well as 15% interest on their respective average
    investment of P200000, P100000, and P400000. If they
    share remaining profits and losses in a 4:3:2 ratio,
    respectively
    By how much would Lopez account increase or decrease (indicate a
    decrease by placing parenthesis), assuming:
    • (a) profit of P405,000
    • (b) profit of P270,000
    • (c) loss of P315,000
    • In addition, calculate (d Lopez share of a P350,000 profit if profit or loss
    distributions were based instead solely on the ratio of average capital
    investments
    A. PROFIT OF ₱ 405,000.00
    average capital:
    Parale ₱ 200,000.00
    Demafels ₱ 100,000.00
    Lopez ₱ 400,000.00
    salaries:
    Parale ₱ 70,000.00
    Demafele ₱ 70,000.00
    Lopez ₱ 70,000.00

    Computation Parale Demafelis Lopez Total


    Salaries ₱ 70,000.00 ₱ 70,000.00 ₱ 70,000.00 ₱ 210,000.00
    Interest on Average Capital balances: @ 15% ₱ 30,000.00 ₱ 15,000.00 ₱ 60,000.00 ₱ 105,000.00
    Balance Distribution 4:3:2 ₱ 40,000.00
    ₱ 30,000.00
    ₱ 20,000.00 ₱ 90,000.00
    Total net income ₱ 140,000.00 ₱ 115,000.00 ₱ 150,000.00 ₱ 405,000.00

    a) the account balance of lopez increases by P150,000


    Journal entry
    debit credit
    income summary ₱ 405,000.00
    Parale, drawing ₱ 140,000.00
    Demafels, drawing ₱ 115,000.00
    Lopez, drawing ₱ 150,000.00
    ₱ 405,000.00 ₱ 405,000.00
    B. PROFIT OF ₱ 270,000.00
    average capital:
    Parale ₱ 200,000.00
    Demafels ₱ 100,000.00
    Lopez ₱ 400,000.00
    salaries:
    Parale ₱ 70,000.00
    Demafele ₱ 70,000.00
    Lopez ₱ 70,000.00

    Computation Parale Demafelis Lopez Total


    Salaries ₱ 70,000.00 ₱ 70,000.00 ₱ 70,000.00 ₱ 210,000.00
    Interest on Average Capital balances: @ 15% ₱ 30,000.00 ₱ 15,000.00 ₱ 60,000.00 ₱ 105,000.00
    Balance Distribution 4:3:2 ₱ (20,000.00)
    ₱ (15,000.00)
    ₱ (10,000.00) ₱ (45,000.00)
    Total net income ₱ 80,000.00 ₱ 70,000.00 ₱ 120,000.00 ₱ 270,000.00

    b) the account balance of lopez increases by P120,000


    Journal entry
    debit credit
    income summary ₱ 270,000.00
    Parale, drawing ₱ 80,000.00
    Demafels, drawing ₱ 70,000.00
    Lopez, drawing ₱ 120,000.00
    ₱ 270,000.00 ₱ 270,000.00
    c. loss of ₱ (315,000.00)
    average capital:
    Parale ₱ 200,000.00
    Demafels ₱ 100,000.00
    Lopez ₱ 400,000.00
    salaries:
    Parale ₱ 70,000.00
    Demafele ₱ 70,000.00
    Lopez ₱ 70,000.00

    Computation Parale Demafelis Lopez Total


    Salaries ₱ 70,000.00 ₱ 70,000.00 ₱ 70,000.00 ₱ 210,000.00
    Interest on Average Capital balances: @ 15% ₱ 30,000.00 ₱ 15,000.00 ₱ 60,000.00 ₱ 105,000.00
    Balance Distribution 4:3:2 ₱ (280,000.00)
    ₱ (210,000.00)
    ₱ (140,000.00) ₱ (630,000.00)
    Total Net loss ₱ (180,000.00) ₱ (125,000.00) ₱ (10,000.00) ₱ (315,000.00)

    c, the balance of lopez decreases by P10,000


    Journal entry
    debit credit
    Parale, drawing ₱ 180,000.00
    Demafels, drawing ₱ 125,000.00
    Lopez, drawing ₱ 10,000.00
    income summary ₱ 315,000.00
    ₱ 315,000.00 ₱ 315,000.00
    d. PROFIT OF ₱ 350,000.00
    average capital:
    Parale ₱ 200,000.00
    Demafels ₱ 100,000.00 ₱ 700,000.00
    Lopez ₱ 400,000.00
    salaries:
    Parale ₱ 70,000.00
    Demafele ₱ 70,000.00
    Lopez ₱ 70,000.00

    Computation Parale Demafelis Lopez Total


    Salaries ₱ 70,000.00 ₱ 70,000.00 ₱ 70,000.00 ₱ 210,000.00
    Interest on Average Capital balances: @ 15% ₱ 30,000.00 ₱ 15,000.00 ₱ 60,000.00 ₱ 105,000.00
    ratio on average capital 0.29, 0.14, 0.57 ₱ 10,150.00
    ₱ 4,900.00
    ₱ 19,950.00 ₱ 35,000.00
    Total net income ₱ 110,150.00 ₱ 89,900.00 ₱ 149,950.00 ₱ 350,000.00

    d) the balance of lopez increases by P149,950


    Journal entry
    debit credit
    income summary ₱ 350,000.00
    Parale, drawing ₱ 110,150.00
    Demafels, drawing ₱ 89,900.00
    Lopez, drawing ₱ 149,950.00
    ₱ 350,000.00 ₱ 350,000.00

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