Elisa Diaz and Mary Manalo formed a partnership investing P330, 000 and P110, 000, respectively. Determine the partners' participation in the 2018 profit of P420, 000 under each of the following independent asssumptons:

a.   No agreement concerning division of profit.

b.    Divided in the ratio of original investment.

c.   Salary allowances of P50, 000 and P70, 000, respectively and the balance to be divided equally.

Answers:

a. Partners participation in net income

Elisa Diaz....210000

Mary Manalo..210000

B.

Partners participation in net income

Elisa Diaz....315000

Mary Manalo..105000

c.

Partners participation in net income

Elisa Diaz....50000+150000 = 200000

Mary Manalo..70000+150000=220000

Step-by-step explanation

Answer a.

If there is no agreement concerning division of profit, net income will be distributed Equally. Ratio will be 1/2 and 1/2 as there is 2 partners.

Elisa Diaz share in Net income = 420000*1/2 = 210000

Mary Manalo share in net income = 420000*1/2 = 210000

Answer b.

Original investment of Elisa Diaz and Mary Manalo is P330000 and P110000 respectively. So ratio will be 330000/440000 and 110000/440000

So Elisa Diaz share in Net income = 420000*330000/440000

=315000

Mary Manalo share in Net income = 420000*110000/440000

=105000

Answer c.

Salary allowances are guarenteed payment. So Net income after salary allowances will be distributed in profit sharing ratio of 1/2 and 1/2 as ratio is equal.

Net income before salary allowances.......420000

Less: salary allowane to Elisa Diaz............-50000

less: Salary allowances to Mary Manalo.....-70000

Net income to be distributed.......................300000

Elisa Diaz share in Net income = 300000*1/2 = 150000

Mary Manalo share in net income = 300000*1/2 = 150000

Partners participation in net income

Elisa Diaz....50000+150000 = 200000

Mary Manalo..70000+150000=220000