Question

A partnership began its first year of operations with the following capital balances; Neil Capital 143,000, Matthew 104,000, Vino Capital 143,000.

The Articles of partnership stipulated that profits and losses be assigned in the following manner;

Neil was to be awarded an annual salary of P26,000 with P13,000 salary assigned to Vino.

Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.

The remainder was to be assigned on a 5:2:3 basis, respectively.

Each partner was allowed to withdraw up to P13,000 per year.

Assume that the net loss for the first year of operations was P26,000 with net income of P52,000 in the second year. Assume further that each partner withdrew the maximum amount from the business each year. What was the balance in Neil's Capital account at the end of the first year?

Answer 1

Balance in Neil's CApital Account at the end of first year = P118,300

Notes:P&L appropriation balance is distributed in the ratio 5:2:3

So neil's Share is P104,000 / 2

= P52,000