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:
- Salaries of P60,000 and P72,000 per annum.
- Interest of 12% and 10% on beginning capital.
- Bonus to Pocholo computed as 20% of net income before tax and after bonus.
- Remaining profits shall be divided in 6:4 ratio. Losses shall be divided equally.
- 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.
- It is the accounting policy of the partnership to debit cash on the expired portion of the prepaid rent.
The partnership reported a profit ending December 31, 2016 amounting to P540,000.
- Prepare schedule of distribution of profits
- 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.
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