Problem #19

Distribution of Profits or Losses Based on Partners’ Agreement

Toys for the Big Boys is a partnership that sells sporting goods. The partnership agreement provides for 10% interest on
invested capital; salaries of P240000 to Alvaro and P280000 to Yacapin; and bonus for Alvaro. The 2018 capital accounts
were as follows:

Alvaro, Capital Yacapin, Capital

8/1 150000 1/1 500000 7/1 100000 1/1 700000
4/1 50000 9/1 225000
Required:
For each of the following independent situations, prepare the profit distribution schedule:
1. Interest is based on average capital balances. The bonus is 5% and is calculated on profit after bonus. In 2018,
profit was P642600. Any remainder is divided between Alvaro and Yacapin in a 3:2 ratio, respectively.
2. Interest is based on ending capital balances after deducting salaries, which the partners normally withdraw
during the year. The bonus is 8% and is calculated on profit after bonus and salaries. Profit was P1087000. Any
remainder is divided equally.
3. Interest is based on beginning capital balances. The bonus is 12.5% and is calculated on profit after bonus. Profit
was P769500. Any remainder is divided between Alvaro and Yacapin in a 4:2 ratio, respectively.
  Alvaro Yacapin Total
Interest 47500.00 72500.00 120000.00
240000.0
Salaries 0 280000.00 520000.00
Bonus 5% 30600.00   30600.00
Remainder 3:2 -16800.00 -11200.00 -28000.00
301300.0
Profit 0 341300.00 642600.00

  Alvaro Yacapin Total

Interest 16000.00 54500.00 70500.00
240000.0
Salaries 0 280000.00 520000.00
Bonus 8% 42000.00   42000.00
227250.0
Remainder 1:1 0 227250.00 454500.00
525250.0 1087000.0
Profit 0 561750.00 0

  Alvaro Yacapin Total

Interest 50000.00 70000.00 120000.00
240000.0
Salaries 0 280000.00 520000.00
Bonus 12.5% 85500.00   85500.00
Remainder 4:2 29333.33 14666.67 44000.00
404833.3
Profit 3 364666.67 769500.00
 Average Capital Balances
  Alvaro   Yacapin
500000.0
1-Jan 0 1-Jan 700000.00
1-Apr 37500.00 1-Sep 75000.00
-
1-Aug 62500.00 1-Jul -50000.00
475000.0
Total 0 Total 725000.00

  Alvaro Yacapin Total

Beginning 500000.0 700000.0 1200000.0
Capital 0 0 0
       
400000.0 825000.0 1225000.0
Ending Capital 0 0 0
240000.0 280000.0
Salaries 0 0 520000.00
160000.0 545000.0
Total 0 0 705000.00