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    Partnership and Corporation Problem Example

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    Gabrielle Ruthe Lao
    - DGB and DSP are partners in an import-export business whose capital account transactions from January to October 2018 are presented. - Their average capital balances were ₱600,000 for DGB and ₱850,000 for DSP, out of a total average capital of ₱1,450,000. - If profits of ₱180,000 are divided based on average capital ratios, DGB's share is ₱74,482.76 and DSP's share is ₱105,517.24.

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    Partnership and Corporation Problem Example

    Uploaded by

    Gabrielle Ruthe Lao
    770 views2 pages
    - DGB and DSP are partners in an import-export business whose capital account transactions from January to October 2018 are presented. - Their average capital balances were ₱600,000 for DGB and ₱850,000 for DSP, out of a total average capital of ₱1,450,000. - If profits of ₱180,000 are divided based on average capital ratios, DGB's share is ₱74,482.76 and DSP's share is ₱105,517.24.

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    an example problem and solution about partnership and corporation

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    Partnership and Corporation problem example

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    - DGB and DSP are partners in an import-export business whose capital account transactions from January to October 2018 are presented. - Their average capital balances were ₱600,000 for DGB and ₱850,000 for DSP, out of a total average capital of ₱1,450,000. - If profits of ₱180,000 are divided based on average capital ratios, DGB's share is ₱74,482.76 and DSP's share is ₱105,517.24.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    770 views2 pages

    Partnership and Corporation Problem Example

    Uploaded by

    Gabrielle Ruthe Lao
    - DGB and DSP are partners in an import-export business whose capital account transactions from January to October 2018 are presented. - Their average capital balances were ₱600,000 for DGB and ₱850,000 for DSP, out of a total average capital of ₱1,450,000. - If profits of ₱180,000 are divided based on average capital ratios, DGB's share is ₱74,482.76 and DSP's share is ₱105,517.24.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    PARTNERSHIP AND CORPORATION ACCOUNTING

    Problem F: DGB and DSP are partners engaged in an export-import business. Several transactions
    during 2018 affected the partners’ capital accounts, which are summarized as follows:

    DGP DSP
    Debit Credit Debit Credit
    Balance, Jan. 1 ₱600,000.00 ₱800,000.00
    Mar. 1 ₱100,000.00
    Apr. 1 ₱200,000.00
    May 1 ₱100,000.00
    Jun. 30 ₱150,000.00
    Aug. 30 ₱100,000.00
    Oct. 1 ₱150,000.00
    Oct. 31 ₱125,000.00 ₱50,000.00

    At the end of the year, the Income Summary account has a credit balance of ₱180,000.00.

    6. If profits and losses are divided using the average capital ratio, how much is the share of DGB
    in the profit?

    RATIO OF AVERAGE CAPITAL BALANCES


    Investments & Capital Average
    PARTNERS Date Month Year Month
    Withdrawals Balance Capital
    Balance, Jan. 1 ₱600,000.00 ₱600,000.00 2 12 ₱100,000.00
    Mar. 1 (₱100,000.00) ₱500,000.00 2 12 ₱83,333.33
    DGB May 1 ₱100,000.00 ₱600,000.00 5 12 ₱250,000.00
    Oct. 1 ₱150,000.00 ₱750,000.00 1 12 ₱62,500.00
    Oct. 31 (₱125,000.00) ₱625,000.00 2 12 ₱104,166.67
    12
    DGB's Average Capital ₱600,000.00

    Balance, Jan. 1 ₱800,000.00 ₱800,000.00 3 12 ₱200,000.00


    Apr. 1 ₱200,000.00 ₱1,000,000.00 3 12 ₱250,000.00
    DSP Jun. 30 (₱150,000.00) ₱850,000.00 2 12 ₱141,666.67
    Aug. 30 (₱100,000.00) ₱750,000.00 2 12 ₱125,000.00
    Oct. 31 ₱50,000.00 ₱800,000.00 2 12 ₱133,333.33
    12
    DSP's Average Capital ₱850,000.00
    Total Average Capital ₱1,450,000.00
    Net Income Ave. Cap. Total Ave. Cap. Profit Share
    DGB ₱180,000.00 ₱600,000.00 ₱1,450,000.00 ₱74,482.76
    DSP ₱180,000.00 ₱850,000.00 ₱1,450,000.00 ₱105,517.24
    ₱180,000.00

    7. Assume that the partners agreed on the following interest on average capital at 8%; salaries of
    ₱24,000 and ₱48,000 to DGB and DSP respectively; bonus to DGB at 20% of profit after deducting
    interest and salaries but before deducting bonus; and any remaining amount divided equally. How
    much is the share of DSP in profit?

    Interests
    DGB ₱600,000.00 0.08 ₱48,000.00
    DSP ₱850,000.00 0.08 ₱68,000.00
    TOTAL INTERESTS ₱116,000.00

    DGB DSP TOTAL


    Salaries ₱24,000.00 ₱48,000.00 ₱72,000.00
    Interests ₱48,000.00 ₱68,000.00 ₱116,000.00
    Bonus ₱0.00 ₱0.00 ₱0.00
    Remaining (₱4,000.00) (₱4,000.00) (₱8,000.00)
    SHARE IN
    PROFIT
    ₱68,000.00 ₱112,000.00 ₱180,000.00

    *Note: Bonus is profit-based. There would be no bonus allowed if the total salaries and interests
    exceed the net income after the deduction of salaries and interest.
    “The bonus is computed on the basis of partnership profit as the concept of ‘partnership profit’ is
    generally understood in accounting practice. Partners may, however, intend for salaries and interest
    allowances to be deducted in determining the base for computing the bonus. In such case, no bonus
    is allowed if there is insufficient profit after distribution of salaries and interests.” (Tolentino-
    Baysa, G. J., & Lupisan, M. C. Y. 2018. Accounting for Partnership and Corporation. 2018th Ed.
    Mandaluyong City, Philippines: Millenium Books, Inc.)

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