Problem #10
Rules for the Distribution of Profit or Losses
Stephanie Calamba and Allan Brillantes Decided to form a partnership. They agreed that Calamba will
invest P200,000 and Brillantes, P300,000. Calamba will devote full time to the business, and Brillantes on
part-time only. The following plans for the division of profits are being considered.
a.
b.
c.
d.
e.
f.
Equal division.
In the ratio of original investments.
In the ration of time devoted to the business.
Interest of 10% on original investments and the remainder in the ratio of 3:2.
Interest of 10% on original investments, salary allowances of P340,000 to Calamba and P170,000
to Brillantes, and the reminder equally.
Plan (e), except that Calamba is also to be allowed a bonus equal to 20% of the amount by which
profit exceeds the salary allowances.
Required:
Determine the partners’ share in the profit or loss for each of the situations above assuming: (1) profit
of P1,500,000 and (2) profit of P660,000
Profit of P1,5000,000
a. Equal division.
Income Summary
P1,500,000
Stephanie Calamba, Drawing
Allan Brillantes, Drawing
P750,000
P750,000
b. In the ration of original investments.
Income Summary
P1,500,000
Stephanie Calamba, Drawing
P600,000
Allan Brillantes, Drawing
P900,000
Computation:
Calamba: P1,500,000 × P200,000 / P500,000 = P600,000
Brillantes: P1,500,000 × P300,000 / P500,000 = P900,000
c. In the ratio of time devoted to the business.
Income Summary
P1,500,000
Stephanie Calamba, Drawing
P1,000,000
Allan Brillantes, Drawing
P500,000
Computation:
Calamba: P1,500,000 × 2 ÷ 3 = P1,000,000
Brillantes: P1,500,000 × 1 ÷ 3 = P500,000
d. Interest of 10% on original investments and the remainder in the ratio of 3:2.
Income Summary
P1,500,000
Stephanie Calamba, Drawing
P890,000
Allan Brillantes, Drawing
P610,000
Computation:
10% interest in Original investment
Calamba: P200,000 × 10% = P20,000
Brillantes: P300,000 × 10% = P30,000
Balance to be divided in the ratio of 3:2
(P1,500,000 – P50,000 = P1,450,000)
Calamba: P1,450,000 × 3/5 = P870,000
Brillantes: P1,450,000 × 2/5 = P580,000
Share in Profit
Calamba: P20,000 + P870,000 = P890,000
Brillantes: P30,000 + 580,000 = P610,000
e. Interest of 10% on original investments, salary allowances of P340,000 to Calamba and
P170,000 to Brillantes, and the remainder equally.
Income Summary
P1,500,000
Stephanie Calamba, Drawing
P830,000
Allan Brillantes, Drawing
P670,000
Computation:
Calamba
Brillantes
Total
Salary Allowances
P340,000
P170,000
P510,000
Interest in Original Investment
P20,000
P30,000
P50,000
Balance to be divided equally
(P1,500,000 – P510,000 –
P50,000 = P940,000)
Calamba: P940,000 × 50%
P970,000
Brillantes: P940,000 × 50%
Share in Profits
P830,000
P470,000
P940,000
P670,000
P1,500,000
f.
Plan (e), except that Calamba is also to be allowed a bonus equal to 20% of the amount by
which profit exceeds the salary allowances.
Profit of P660,000
a. Equal division.
Income Summary
P660,000
Stephanie Calamba, Drawing
P330,000
Allan Brillantes, Drawing
P330,000
b. In the ratio of original investments.
Income Summary
P660,000
Stephanie Calamba, Drawing
P264,000
Allan Brillantes, Drawing
P396,000
Computation:
Calamba: P660,000 × P200,000 / P500,000 = P264,000
Brillantes: P660,000 × P300,000 / P500,000 = 396,000
c. In the ration of time devoted to the business.
Income Summary
P660,000
Stephanie Calamba, Drawing
P440,000
Allan Brillantes, Drawing
P220,000
Computation:
Calamba: P660,000 × 2 ÷ 3 = P440,000
Brillantes: P660,000 × 1 ÷ 3 = P220,000
d. Interest of 10% on original investments and the remainder in the ratio of 3:2.
Income Summary
P660,000
Stephanie Calamba, Drawing
P386,000
Allan Brillantes, Drawing
P274,000
Computation:
10% interest on original investments
Calamba: P200,000 × 10% = P20,000
Brillantes: P300,000 × 10% = P30,000
Balance to be divided in the ratio of 3:2
(P660,000 – P50,000 = P610,000)
Calamba: P660,000 × 3/5 = P366,000
Brillantes: P660,000 × 2/5 = P244,000
Share in Profit
Calamba: P20,000 + P366,000 = P386,000
Brillantes: P30,000 + P244,000 = P274,000
e. Interest of 10% on original investments, salary allowances of P340,000 to Calamba and
P170,000 to Brillantes, and the reminder equally.
Income Summary
P660,000
Stephanie Calamba, Drawing
P410,000
Allan Brillantes, Drawing
P250,000
Computation:
Calamba
Brillantes
Salary Allowances
P340,000
P170,000
Interest on Orig. Investment
P20,000
P30,000
Total
P510,000
P50,000
Balance to be divided equally
(P660,000 – P510,000P50,000 = P100,000)
Calamba: P100,000 × 50%
P50,000
Brillantes: P100,000 × 50%
Share in Profit
P410,000
P50,000
P100,000
P250,000
P660,000
f. Plan (e), except that Calamba is also to be allowed a bonus equal to 20% of the
amount by which profit exceeds the salary allowances.