Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Transcribed Image Text:PROBLEM A Distribution of Profits or Losses Based on Partners’ Agreement
Mandatory Problem to be solved by every group
Lucas, Thomas, and Stephen are partners in an architectural firm. Their capital accounts were as
follows:
Partner
Date
Debit
Credit
Lucas
Lucas
Lucas
January 1, 2021
May 1, 2021
September 1, 2021
300,000.00
60,000.00
80,000.00
Thomas
Thomas
Thomas
Thomas
January 1, 2021
March 1, 2021
July 1, 2021
September 1
400,000.00
90,000.00
50,000.00
40,000.00
Stephen
Stephen
Stephen
Stephen
January 1
April 1
June 1
500,000.00
70,000.00
30,000.00
August 1
120,000.00
Required:
For each of the following independent profit and loss agreement, prepare the income distribution
schedule:
Salaries are provided as follows: Lucas – Php 150,000, Thomas – Php 200,000, and Stephen-
Php 180,000. Special Compensation is given to Lucas amounting to 5 percent of the Net
Income before distribution of salaries. Interest is 10 percent of the partners' ending capital
balances. Lucas, Thomas, and Stephen will divide the remainder in a 3:3:4 ratio. Net income
as of December 31, 2021 was Php 989,600.
1.
Interest is 10 percent of average capital balances. Salaries are provided as follows: Lucas
Php 240,000, Thomas – Php 210,000, and Stephen – Php 250,000. Thomas receives a special
compensation which is 10 percent of net income after salaries and interest. Any remainder is
divided equally. Net income as of December 31, 2021 was Php 1,180,800.
2.
Interest is 10 percent of beginning capital balances. Salaries are provided as follows: Lucas
Php 210,000, Thomas – Php 180,000, and Stephen – Php 150,000. Stephen receives a special
compensation which is 15 percent of net income after salaries and interest. Any remainder is
divided in the following ratio: 8:7:5 ratio.
Php 929,400.
3.
Net income as of December 31, 2021 was
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