Question:
On January 1, FRED and GEMMO formed a partnership by contributing cash of P405,000
and P270,000, respectively. On February 1. Fred contributed an additional P135,000. On
May 1, Gemmo contributed machinery with a fair market value of P90,000 and a net book
value of P75,000 when contributed. On November 1 Gemmo contributed an additional
P45,000 cash to the partnership.
The partnership reported a net income of P257,400 for the year and the profit or loss
agreement are as follows:
• Interest at 6% is allowed on average capital balances;
• Salaries if P2,700 per month to each partner;
• Bonus to Fred of 10% of net income after interest, salaries and bonus; and
• Balance to be divided in the ratio of 6:4 to Fred and Gemmo, respectively.
Required: Prepare a schedule for the division of net profit for 2016 with supporting
computations when appropriate
Answer:
NIASIB
Fred Gemmo Total
Salary 32,400 32,400 64,800
Interest 31,725 20,250 51,975
Bonus 12,784.09 0 12,784.09
Residual Profit 76,704.55 51,136.36 127,840.91
Share in net profit 153,614 103,786 257,400
Beginning Balance 528,750 337,500 866,250
Ending Balance 682,364 441,286 1,123,650
NIASIB
x=10%(NI-S-I-x)
x=10%(257,400-64,800-51,975-x)
x=10%(140,625-x)
x=14,062.5-.10x
x+.10x=14,062.5
1.10x=14,062.5
x=12,784.09
On January 1, FRED and GEMMO formed a partnership by contributing cash of P405,000
and P270,000, respectively. On February 1. Fred contributed an additional P135,000. On
May 1, Gemmo contributed machinery with a fair market value of P90,000 and a net book
value of P75,000 when contributed. On November 1 Gemmo contributed an additional
P45,000 cash to the partnership.
The partnership reported a net income of P257,400 for the year and the profit or loss
agreement are as follows:
• Interest at 6% is allowed on average capital balances;
• Salaries if P2,700 per month to each partner;
• Bonus to Fred of 10% of net income after interest, salaries and bonus; and
• Balance to be divided in the ratio of 6:4 to Fred and Gemmo, respectively.
Required: Prepare a schedule for the division of net profit for 2016 with supporting
computations when appropriate
Answer:
NIASIB
Fred Gemmo Total
Salary 32,400 32,400 64,800
Interest 31,725 20,250 51,975
Bonus 12,784.09 0 12,784.09
Residual Profit 76,704.55 51,136.36 127,840.91
Share in net profit 153,614 103,786 257,400
Beginning Balance 528,750 337,500 866,250
Ending Balance 682,364 441,286 1,123,650
NIASIB
x=10%(NI-S-I-x)
x=10%(257,400-64,800-51,975-x)
x=10%(140,625-x)
x=14,062.5-.10x
x+.10x=14,062.5
1.10x=14,062.5
x=12,784.09
