Reference no: EM132577136

A, B, and C formed a joint operation. They agreed on the following:

• C is appointed as the manager. As a compensation, C is entitled to a 120 salary plus bonus of 25% of profit after deducting the salary and bonus. However, C will be charged for the cost of any unsold inventory.
• Interest of 10% per annum is allowed to A's and B's capital contributions.
• Any remaining profit or loss is divided equally.

The joint operation was completed after a year. The following were the transactions:

• A contributed cash of 400 and merchandise costing 800
• B contributed merchandise costing 1,600. B paid freight of 80 in the transfer
• C purchased merchandise worth 400 using A's contribution
• C paid expenses of 800 using his own cash
• C made total sales of 3,200
• All inventories were sold except one-half of those contributed by B.

Question 1: How much is the joint operation's profit after deduction for salary but before deduction for bonus?

a. 192 b. 240 c. 360 d. 420

Question 2: On the cash settlement between the joint operators,

a. A pays 1,288 b. B pays 1,816 c. C receives 96 d. all of these