AGREEMENTS
A B C
Monthly Salaries 10,000 6,000 8,000
Interest - W.A.C. 0 0 0
Bonus 0
Remainder Based on Simple Average Capital Balance
Other Agreements: It was also agreed that temporary withdrawals will not be co
A their capital provided that these are settled within the year.
Any unsettled temporary withdrawal will be treated as capital
B the actual withdrawal.
Advance withdrawals for salaries shall likewise not considered a
C deducted from their final distribution of profit
Net Income After Salaries, Interest and Bonus
rary withdrawals will not be considered as deduction from
e are settled within the year.
rawal will be treated as capital withdrawal from the date of
s shall likewise not considered as capital withdrawals but will be
bution of profit
Income Before S, I, B 1,200,000
288,000
912,000
Interest 57,900
Income After S, I, and Before B 854,100
Bonus Rate 10%
Income After S, I, and B 768,690
Tax Rate 30%
Income After S, I, B, and T 538,083
Additional information:
a. Jan 1, 2019 capital balances of the three partners are as follows: A – P200,000; B – P300,0
b. On February 15, 2019, A made an additional investment of P40,000. Likewise on the same date
c. On June 1, 2019, C made an additional investment of P10,000.
d. On Sept 30, 2019, A, made a temporary withdrawal of P20,000, and on the same date,
B partially return amount of P10,000 from his temporary withdrawal on Feb 15. and according to him
he will not be able to settle the remaining balance within the year
e. On November 1, 2019, partners made an advanced withdrawals for their salaries as follow
ws: A – P200,000; B – P300,000; C-P450,000
0. Likewise on the same date, B made a temporary withdrawal of P30,000.
and on the same date,
Feb 15. and according to him,
ls for their salaries as follows : A- P60,000 ; B-P80,000; C- P40,000
OVERVIEW OF TRANSACTIONS
Date Transaction A B C Total
a Jan 1 2019 Beginning Balance 200,000 300,000 450,000 950,000
b Feb 15 2019 Invest(Drawings) 40,000 (20,000) 20,000
c June 1 2019 Invest(Drawings) 10,000 10,000
d Sept 30 2019 Invest(Drawings) (20,000) (20,000)
Ending Balance 220,000 280,000 460,000 960,000
SIMPLE AVERAGE CAPITAL BALANCE
Total
Beginning Balance 200,000 300,000 450,000 950,000
Ending Balance 220,000 280,000 460,000 960,000
420,000 580,000 910,000 1,910,000
Divided by: 2 2 2 2
CAPITAL BALANCE 210,000 290,000 455,000 955,000
WEIGHTED AVERAGE CAPITAL BALANCE
Date Months OS / Total CAPITAL BALANCE
A Amount Months
Beg. Bal. Jan 1 200,000 12/12 200,000
Addt'l Inv.Feb 15 40,000 10/12 33,333.33
Drawings Sept 30 (20,000) 3/12 (5,000) 228,333
B SIR CHO
Beg. Bal. Jan 1 300,000 12/12 300,000
Drawings Feb 15 (20,000) 10/12 (16,666.67) 283,333
C
Beg. Bal. Jan 1 450,000 12/12 450,000
Addt'l Inv June 1 10,000 7/12 5,833.33 455,833
TOTAL 967,500
1) Compute for the distribution of profit of P1,200,000.
A B C Total
Annual Salaries 120,000 72,000 96,000 288,000
WEIGHTED Interest 13,700 17,000 27,350 58,050
* Bonus 77,623 77,618.18
SIMPLE Remainder 170,712 235,745 369,875 776,331.82
Profit Distribution 304,412 402,367 493,225 1,200,000
Bonus of 10% of Net Income After Salaries, Interest and Bonus
* Let B = Bonus
B= 10% (NI - S - I - B)
B= 10% (1,200,000 - 288,000 - 58,050 - B)
B= 120,000 - 28,800 - 5,820 - 0.1B
1.1B = 85,380
B= 77,618.18
WEIGHTED AVERAGE CAPITAL BALANCES
A 228,333.33
B 283,333.33 FOR INTEREST
C 455,833.33
TOTAL 967,500
*squeezed
SIMPLE AVERAGE CAPITAL BALANCES
A 210,000
B 290,000 FOR REMAINDER
C 455,000
TOTAL 955,000
2) How much will each partner received after deducting the advanced salaries
A B C Total
Annual Salaries 60,000 (8,000) 56,000 108,000
WEIGHTED Interest 13,700 17,000 27,350 58,050
* Bonus 94,009 93,982
SIMPLE Remainder 206,695 285,435 447,838 939,968
Distribution Of Profit 280,395 388,444 531,188 1,200,000
* Let B = Bonus
B= 10% (NI - S - I - B)
B= 10% (1200000 - 108000 - 58200 - B)
B= 120,000 - 10,800 - 58,200 - 0.1B
1.1B = 120,000 - 10800 - 5820
B= 93,981.82
WEIGHTED AVERAGE CAPITAL BALANCES
A 228,333.33
B 283,333.33 FOR INTEREST
C 455,833.33
TOTAL 967,500
SIMPLE AVERAGE CAPITAL BALANCES
A 210,000
B 290,000 FOR REMAINDER
C 455,000
TOTAL 955,000
Distribution of Profit 310,216 400,384.12 489,400.33 1,200,000
Advance Withdrawals (60,000.0) (40,000.0) (80,000.00) -180,000
Adjusted Distrib. Profit 250,216 ### 409,400.33 1,020,000
3) How much will be B’s share in the net profit, if his bonus is based on net profit after
salaries, interest, bonus and tax. Assume a tax rate of 30%
A B C Total
Annual Salaries 60,000 (8,000) 56,000 108,000
WEIGHTEDInterest 13,700 17,000 27,350 58,050
* Bonus 67,642 67,642
SIMPLE Remainder 212,487 293,434 460,388 966,308
Distribution Of Profit 286,187 370,076 543,738 1,200,000
B = Br ( NI - S - I - B - T)
T = Tr ( NI - S - I - B)
B= 10% (1200,000 - 108,000 - 58,050 - B - T)
T= 30% (1200,000 - 108,000 - 58,050 - B)
B= 120,000 - 10,800 - 5,805 - .1B - .1(30%(1200,000 - 108,000 - 58,050 - B)
B= 103,395 - .1B - .1(310,185 - 0.3B)
B= 103,395 - .1B - 31,018.5 + 0.03B
1.07B= 103,395 - 31,018.5
1.07B= 72,376.5
B= 67,641.59
WEIGHTED AVERAGE CAPITAL BALANCES
A 228,333.33
B 283,333.33 FOR INTEREST
C 455,833.33
TOTAL 967,500
SIMPLE AVERAGE CAPITAL BALANCES
A 210,000
B 290,000 FOR REMAINDER
C 455,000
TOTAL 955,000
Income Before S, I, B 1,200,000
Salary 108,000
Income After S, Before I, and B 1,092,000
Interest 58,050
Income After S, I, and Before B 1,033,950
Bonus 67,642 10%
Income After S, I, B, but Before Tax 966,308
Tax 289,892 30%
Income After S, I, B, and T 676,416 70%
4) Assume that the salaries of the partners are treated and recorded as part of the
partnership’s operating expense. How much will be share of each partner’s in the profit.
A B C Total
Annual Salaries 60,000 (8,000) 56,000 108,000
WEIGHTEDInterest 13,700 17,000 27,350 58,050
* Bonus 94,009 93,982
SIMPLE Remainder 206,695 285,435 447,838 939,968
Distribution Of Profit 280,395 388,444 531,188 1,200,000
WEIGHTED AVERAGE CAPITAL BALANCES
A 228,333.33
B 283,333.33 FOR INTEREST
C 455,833.33
TOTAL 967,500
SIMPLE AVERAGE CAPITAL BALANCES
A 210,000
B 290,000 FOR REMAINDER
C 455,000
TOTAL 955,000
