Rules for the Distribution of Profits or Losses

Alisuag, Go, and Palatino formed a partnership on Jan. 1, 2022 with capital
contributions of P300,000, P500,000, and P200,000, respectively. For the year ended
Dec. 31, 2022, the partnership reported profit of P450,000

Required: Determine the

partners' share in the
profit under each of the
following independent
situations and prepare the
entry to record the profit
allocation to individual
capital accounts:

1. Profit is allocated on
the basis of the initial
capital contributions.
2. Each partner is allotted
an interest of 7% on initial
capital contributions and
the remainder is divided
among Alisuag, Go, and
Palatino in the ratio 4:3:1,
respectively.
3. Salaries of P50,000,
P40,000, and P30,000 are
given to Alisuag, Go, and
Palatino, respectively; 5%
interest on initial capital
contributions, and any
remainder is divided in
the ratio 4:3:1,
respectively.
4. Salaries of P30,000,
Problem #17
Rules for the Distribution of
Profits or Losses
Alisuag, Go, Palatino formed a
partnership on Jan 1, 2018 with
capital contributions of P300000,
P500000, and P200000,
respectively. For the year ended
Dec 31, 2018, the partnership
reported profit of P450000.
Required
Problem # 16
Alisuag Go Palantino
Capital contribution Php 300,000 Php 500,000 Php 200, 000

Profit- Php 450,000 Ratio- 3:5:2

1. Profit is allocated on the basis of the initial capital contributions.
Ratio according to capital contributions- 3:5:2=10
ALISUAG= 450,000*3/10= 135,000
GO= 450,000*5/10= 225,000
PALATINO= 450,000*2/10=90,000

ALISUAG GO PALATINO TOTAL

*Profit ratio according to Php 135,000 Php 225,00 Php 90,000 Php 450,000
capital contributions
2. Each partner is allotted an interest of 7% on initial capital contributions and the remainder is divided
among Alisuag, Go, and Palatino in the ratio 4:3:1, respectively.

Alisuag Go Palatino Total

Capital contribution Php 300,000 Php 500,000 Php 200, 000 1,000,000
7% interest 21,000 35,000 14,000 70,000
Remainder (4:3:1) 190,000 142,500 47,500 380,000
Share in profit 211,000 177,500 61,500 450,000
(interest and
remainder

Computation for the remainder Computation for the Interest

Alisuag- 380,000/8*4= 190,000 300,000* 7%= 21,000

Go -380,000/8*3= 142,500 500,000*7%= 35,000

Palatino- 380,000/8*1= 47,500 200,000*7%= 14,000

3. Salaries of P50,000, P40,000, and P30,000 are given to Alisuag, Go, and Palatino, respectively; 5% interest
on initial capital contributions, and any remainder is divided in the ratio 4:3:1, respectively.
ALISUAG GO PALATINO TOTAL
Salaries Php 50,000 Php 40,000 Php 30,000 Php 120,000
Interest 15,000 25,000 10,000 50,000
Remainder (4:3:1) 140,000 105,000 35,000 280,000
Share in Profit 205,000 170,000 75,000 450,000

Computation for the Interest Computation for the Remainder

Alisuag- 300,000*5= 15,000 280,000/8*4= 140,000
Go- 500,000*5= 25,000 280,000/8*3= 105,000
Palatino- 200,000*5= 10,000 280,000/8*1= 35,000

4. Salaries of P30,000, P45,000, and P65,000 are given to Alisuag, Go, and Palatino, respectively; 5% interest
on initial capital contributions; bonus to Alisuag of 8% of profit after deducting bonus but before deducting
salaries and interest; and any remainder divided equally.

Alisuag Go Palatino TOTAL

Salaries Php 30,000 Php 45,000 Php 65,000 Php 140,000
Interest 15,000 25,000 10,000 50,000
Bonus 33,333.33 33,333.33
Remainder 75,555.55667 75,555.55667 75,555.55667 226,666.67
 Share in profit 153,890 145,560 150,550 450,000

Computation for Interest Computation for remainder

(initial capital) (divided equally)
Remainder PROFIT = 450,000
Alisuag- 300,000*5= 15,000 SOLUTION

Go-500,000*5= 25,000 450,000 -profit

Palatino- 200,000*5= 10,000 (140,000) -salaries
(50,000) -interest
Computation for Bonus (33,333.33) -bonus
(8% of profit after deducting bonus but 226,666.67 -remainder
before deducting salaries and interest)

PROFIT = 450,000
SOLUTION
Computation for
450,000 ÷ =108%
remainder
416,666,67(X 8%) =100% (divided equally)
‘’ 33,333.33 =8%
BONUS= 33,333 226,666.67/3
=75,555.55667

Entry to record the profit allocation to individual capital account

1. 2.
Income Summary 450,000 Income Summary 450,000
Alisuag, Drawing 135,000 Alisuag, Drawings 211,000
Go, Drawing 225,000 Go, Drawings 177,500
Palatino, Drawings 90,000 Palatino, Drawings 61,500
3.
4.
Income Summary 450,000 Income Summary 450,000
Alisuag, Drawing 205,000
Go, Drawing 170,000
Palatino, Drawings 75,000

Problem # 17
Initial Investment
 Alisuag, Drawings 153,888.88667
Go, Drawings 145,555.55667
Palatino, Drawings 150,555.55667
Mones Php 2,000,000
Pitular 1,000,000
Tuazon 1,000,000

Profit= Php 350,000

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

1. Salaries of P120,000 for Mones, P60,000 for Pitular and P60,000 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,

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.

Mones Pitular Tuazon Total

Salaries Php 120,000 60,000 60,000 240,000
Interest Php100,000 50,000 50,000 200,000
440,000
Remainder (4:1:1) (60,000) (15,000) (15,000) (90,000)
Share in Profit Php 160,000 95,000 95,000 350,000

Computation for Interest Computation for remainder

Mones- 2,000,000* 5%=100,000 (90,000)*4/6= (60,000)
Pitular- 1,000,000* 5%=50,000 (90,000)*1/6= (15,000)
Tuazon-1,000,000*5%=50,000 (90,000)*1/6= (15,000)

2. Partner's salaries and interest on capital balances should be made only to the extent that the profit can provide
Mones Pitular Tuazon Total
Salaries Php 120,000 60,000 60,000 240,000
Interest Php 55,000 27,500 27,500 110,000
Share in Profit Php175,000 87,500 87,500 350,000

Computation for Interest

Mones- 110,000/20*10= 55,000
Pitular- 110,000/20*5 =27,500
Tuazon- 110,000/20*5=27,500

Problem
(20 # 18
for the ratio from the orig. Interest 10:5:5)

Alvaro Salaries= 240,000

Yacapin Salaries= 280,000

Alvaro Capital Yacapin Capital

8/1 150,000 1/1 500,000 7/1 100,000 1/1 700,000

 4/1 50,000 9/1 225,000

1. Interest is based on average capital balances. The bonus is 5% and is calculated on profit after bonus. In 2022,
profit was P642,600. Any remainder is divided between Alvaro and Yacapin in a 3:2 ratio, respectively.

Alvaro Yacapin Total

Interest 10% 47,500 72,500 120,000
Bonus 30,600 30,600
Salaries 240,000 280,000 520,000
Remainder (16,800) (11,200) (28,000)
Share in Profit 301,300 341,300 642,600

Computation for Average capital Computation for Average capital

ALVARO YACAPIN
DATE AMOUNT MONTHS UNCHANGED TOTAL DATE AMOUNT MONTHS UNCHANGED TOTAL
JAN 1 500,000 X3/12 =125,000 JAN 1 350,000 X6/12 =350,000
(+50,000) (-100,000)
APR 1 550,000 X4/12 =183,333 SEP 1 100,000 X2/12 =100,000
(-150,000) (225,000)
AUG 1 400,000 X5/12 =166,667 SEP 1 275,000 X4/12 =275,00
400,000 12 475,00 275,,000 12 725,00
Computation for 10% interest on average capital Computation for 10% interest on average capital
*475,000 x 10% =47,500 *725,000 x 10% =72,500

Computation for Bonus Computation for remainder

(5% of profit after bonus) (divided equally) Computation for
PROFIT = 642,600 remainder
SOLUTION (divide by rato 2:3)
PROFIT = 642,600
SOLUTION -28,000 -remainder
642,600 ÷ =105% 642,600 -profit
612,000(X 5%) =100% (120,000) -interest 3:2 =5
30,600 =5% (520,000) -salary -28,000*3/5=-16,800
BONUS=30,600 (30,600) -bonus
-28,000 -remainder -28,000*2/5=-11,200

INCOME SUMMARY 642,600

ALISUAG, DRAWING 373,300
GO, DRAWING 269,300

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 P1,087,000. Any remainder is
divided equally.
Alvaro Yacapin Total
Salaries 240,000 280,000 520,000
Interest 10% 16,000 54,500 70,500
Bonus 42,000 - 42,000
Remainder (divide equally) 227,250 227,250 454,500
Share in Profit 525,250 561,750 1,087,000

Computation for interest

(based on ending capital bal after deducting
 ALVARO YACAPIN
Alvaro Capital Yacapin Capital
END BAL= 400,000 END BAL= 825,000
8/1 150,000 1/1 500,000 7/1 100,000 1/1 700,000 SALARY=280,000
SALARY=240,000
4/1 50,000 9/1 225,000 INTEREST= 10%
INTEREST= 10%
(150,000) (100,000)
400,000- 825,000 825,000
ending bal, 400,000 ending bal.
(240,000) (280,000)
160,000 545,000
X 10% X 10%
16,000 54,500

3. Interest is based on beginning capital balances. The bonus is 12.5% and is calculated on profit after bonus. Profit was
P769,500. Any remainder is divided between Alvaro and Yacapin in a 4:2 ratio, respectively.
Alvaro Yacapin Total
salaries 240,000 280,000 520,000
Interest 10% 50,000 70,000 120,000
Bonus 85,500 85,500
Remainder (4:2) 29,333 14,667 44,000
Share in profit 404,833 364,667 769,500

Computation for Interest Computation for Bonus Computation for remainder

(12.5% of profit AFTER BONUS) (divided equally)
(Based on Beginning Capital Balances)
PROFIT = 769,500
Alvaro= 500,000* 10%=50,000 PROFIT = 769,500
SOLUTION SOLUTION
Yacapin= 700,000*10% =70,000
769,500 ÷ =112.5% 769,500 -profit
684,000(X 12.5%) =100% (120,000) -interest
85,500 =8% (520,000) -salary
BONUS= 85,500 (85,500) -bonus
44,000 -remainder
44k *4/6=29,333 *2/6=14,667
 GROSS PROFIT
Problem # 19 NET SALES
LESS : COST OF SALES
NET SALES
-are the total revenue generated
by a company, excluding any PROFIT
sales returns, allowances, and GROSS PROFIT COST OF SALES/ GOODS SOLD
discounts. LESS : EXPENSES BEG INV + COGS – ENDING
INV
GROSS SALES
LESS: NET PROFIT
SALES RETURNS AND ALLOWANCES REVENUE
SALES DISCOUNT LESS : EXPENSES
(INCLUDING TAXES AND
INETEREST

SUPER MANILA NOVELTY STORE

COMPREHENSIVE INCOME STATEMENT

FOR THE YEAR-ENDED DECEMBER 31, 2023

NET SALES P 2,500,000.00

LESS: COST OF SALES (1,450,000.00)

GROSS PROFIT 1,050,000.00

LESS:OPERATION EXPENSES
SALARIES EXPENSE 450,000
RENT EXPENSE 200,000
INSURANCE EXPENSE 30,000
UTILITIES EXPENSE 20,000
TOTAL EXPENSES: (700,000)
PROFIT 350,000.00

DIVISION OF PROFIT

CASTOR (30%) ARENAS (20%) LAURENTE (50 %)

PROFIT= 350,000 PROFIT= 350,000 PROFIT= 350,000
30: 20: 50 30: 20: 50 30: 20: 50

350,000 X 3/10 350,000 X 2/10 350,000 X5/10

=105,000 =70,000 =175,000

Castor 105,000

Avenas 70,000
Laurente 175,000
 STATEMENT OF CHANGES IN EQUITY

BEG BALANCE-JAN 1
ADD: ADD INV
PROFIT (FROM SCI)
TOTAL
LESS: WITHDRAWALS
END BAL-DEC 31

SUPER MANILA NOVELTY STORE

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR-ENDED DECEMBER 31, 2023

CASTOR ARENAS LAURENTE TOTAL

PARTENERS’ EQUITY, JAN 1 75,000 300,000 150,000 525,000

ADD: ADDITIONAL INVESTMENT 50,000 25,000 - 75,000

ADD: PROFIT 105,000 70,000 175,000 350,000

TOTAL 230,000 395,000 325,000 950,000

LESS: PERMANENT WITHDRAWAL -50,000 -40,000 90,000

PARTNERS EQUITY, DEC 31 230,000 345,000 285,000 860,000

SUPER MANILA NOVELTY STORE

STATEMENT OF FINANCIAL POSITION
FOR THE YER ENDED DECEMBER 31,2023

ASSETS
CASH 100,000
ACCOUNTS RECEIVABLE 80,000
MERCH. INV 800,000
PREPAID RENT 20,000
PREPAID INSURANCE 15,000
TOTAL ASSETS 1,025,000

LIABILITIES AND EQUITY

ACCOUNTS PAYABLE 50,000
NOTES PAYABLE 115,000
CASTOR, CAPITAL 230,000
ARENAS, CAPITAL 345,000
LAURENTE, CAPITAL 285,000
1,025,000
TOTAL LIABILITIES & EQUITY
DIVISION OF PROFIT CALAMBA SANTIAGO TOTAL
SALARY ALLOWANCES 333,000 290,000 620,000
INTEREST ALLOWANCES 61,200 49,960 111,160
BALANCE EQUALLY 14,130 14,130 29,260
PROFIT 405,330 354,090 759,420
 CALAMBA AND SANTIAGO
STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR-ENDED DECEMBER 31, 2023

CALAMBA SANTIAGO TOTAL

CAPITAL- BEG (JAN 1.2023) 612,000 499,600 1,111,600

PROFIT FOR THE YEAR 405,330 354, 090 759,420

TOTAL 1,017,330 853,690 1,871,020

LESS: WITHDRAWALS FOR THE YEAR -326,400 -244,800 -571,200

CAPITAL.ENDING ( DEC 31, 2023) 690,930 608,890 1,299,820