Practical Accounting 2 Straight Problem No. 3

Refer to the previous article. We will use the info there to solve the next problem on partnership. This time, we are going to solve a problem related to distribution of profits:


After the formation, it was decided by Renzo and Pocholo that profit will be respectively distributed as follows:

  1. Salaries of P60,000 and P72,000 per annum.
  2. Interest of 12% and 10% on beginning capital.
  3. Bonus to Pocholo computed as 20% of net income before tax and after bonus.
  4. Remaining profits shall be divided in 6:4 ratio. Losses shall be divided equally.

Additional information:

  1. Refer to the previous problem in no. (b). Goods relating to the sale were not yet shipped as of year-end. Term is FOB seller.

The partnership reported a profit ending December 31, 2016 amounting to P540,000.

Required:

  1. Prepare schedule of distribution of profits
  2. Prepare adjusting entries

NOTE: We will again use the answers in this problem for our succeeding article. Keep the answers for future reference.


P2 Problem Prepared by: TweetNewscaster.


Featured Image Credit:  Audit Firm Visit photo from St. Scholastica College site. For illustrative purposes only.

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