Assignment – MGT111
Actual Investment Method vs. Bonus Method
Jhoan and Kate formed GK Partnership with an agreement to divided profit and losses equally. The following records are
available before the partnership formation:
Jhoan’s
Book value
Fair value
50,000
50,000
60,000
50,000
Cash
Accounts receivable
Merchandise inventory
Land
Building
Furniture and fixtures
Accounts payable
100,000
200,000
Kate
Book value
Fair value
30,000
30,000
70,000
60,000
150,000
130,000
250,000
150,000
250,000
20,000
200,000
Required:
Compute and journalize the contributions of Jhoan and Kate in the partnership books using
1. Actual Investment Method.
2. Bonus Method assuming that the partners agreed to have an equal capital credit balance.
Methods of Computing Profit and Loss
Paul and Peter formed the 2-P Partnership. The partners’ capital balances during the year are as follows:
3/31
100,000
Paul, Capital
01/01 200,000
06/30 300,000
09/30 400,000
06/30
200,000
Peter, Capital
01/01
07/31
300,000
500,000
Required: Compute the following:
Case 1: Profit distribution and the related journal entry if the partnership has a net income of P 2.000,000.
Case 2: Loss distribution and the related journal entry if the partnership has a net loss of P500,000.
Use the following independent methods of computing profit and loss in both cases above:
1.
Equally
2.
Profit and loss ratio: Paul = 60%; Peter = 40%.
3.
Capital ratios:
a. Beginning capital
b. ending capital
4.
Interest of 6% on the partners’ ending capital, the remainder equally.
5.
Salaries of P15,000 a month for each partner, interest of 10% on ending capital and the remainder 6 and 4 for Paul and Peter,
respectively.