Reference no: EM132828138
Exercise 1 - Division of Profit using Ratios - Bong - three-fourths time Bueno - one-half time Bong, Bueno, and Bunny formed a partnership and have capital balances of P350,000, P250,000 and P200,000, respectively. They devoted time to personally managed their partnership as follows: Bunny - one-fourth time.
Instructions - Determine the participation of the partners in the profit of P1,000,000 if profit is divided:
1. In the ratio of capital investments
2. In the ratio of time devoted in the business
Exercise 2 - Division of Profit; Interest on Capital and Salaries to Partners - Ruel and Renan have a capital balances at the beginning of the year of P600,000 and P675,000, respectively. They share profit as follows:
1. Interest of 8% on beginning capital balances.
2. Salary allowances of P225,000 to Bueno and P115,000 to Renan.
3. Balance in the ratio of 3:2. The partnership realized a profit of P375,000 during the current year before interest and salary allowances to partners.
Instructions -
1. Show how the profit of P375,000 should be divided between Ruel and Renan?
2. Assuming that Ruel and Renan simply agree to share profit in a 3:2 ratio with a minimum of P175,000 guaranteed to Renan, show the profit of P375,000 should be divided.
Exercise 3 - Division of Profit; Interest on Capital, Salary Allowance, and Bonus to Managing Partner - Becky and Lala formed a partnership on January 2, 2019 and agreed to share profit 90% and 10%, respectively. Becky invested cash of P200,000. Lala invested no assets but has a specialized expertise and manages the firm full time. There were no withdrawals during the year. The partnership contract provides for the following:
1. Capital accounts are to be credited annually with the interest at 10% of beginning capital.
2. Lala is to be paid a salary of P8,000 a month.
3. Lala is to receive a bonus of 25% of profit calculated before deduction of salary and interest on capital accounts.
4. Bonus, interest, and Lala's salary are to be considered as expenses.
The fiscal year 2014 income statement for the partnership includes the following: Revenue P701,600 Expenses (including salary, interest and bonus) 379,600
Profit P322,000
Instructions - Determine the amount of bonus to be credited to Lala.