Reference no: EM132513349

Question - Order of Priority On Jan 1, 2018, the Mones, Pitular and Tuazon Partnership was formed with initial investment by the partners as follows:

Mones P2,000,000

Pitular P1,000,000

Tuazon P1,000,000

According to the partnership agreement, profit or loss is to be divided among the partners as follows:

1. Salaries of P120000 for Mones, P60000 for Pitular and P60000 for Tuazon.

2. Interest at 5% on the original capital balances.

3. The remainder to be divided among Mones, Pitular, and Tuazon in a ratio of 4:1:1, respectively.

The partnership reported profit of P350000 for the year ended Dec 31, 2018.

Required - Determine the partners' share in the profit under each of the following independent situations:

1. Partner's salaries and interest on capital balances should be fully allocated and any deficiency between these allocations and profit is to be divided among Mones, Pitular and Tuazon in the ratio 4:1:1, respectively.

2. Partner's salaries and interest on capital balances should be made only to the extent that the profit can provide.