A and B share profit on a 3:2 basis. on July 1 C enters the partnership and their sharing ratio changes to 50%, 25%,25%. Annual salary for B and C are 20000 and 12000 respectively. Profit for the year ended dec31 was 480,000 accrued evenly over the year. how to calculate the respective profits of A, B and C.pls explain in little detail frndz.
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FAquestion about profit sharing
hey,
well let's see .
Profit was accrued evenly, that means same amount was is deemed to be received every month.
A change in profit share ratio took place in mid year, that means up to this date, half of 480.000 was earned, that is : 480.000 / 2 = 240.000.
Salary of partners is paid first (as far as i remember, check in your book to be sure) that means before you share profit, 10.000 goes to B ,because now u deal with first half of the year, so for half year u take half salary. Leave C's salary apart for now, as he didn't join the partnership yet.
Then u need to share rest of profit : 240.000 - 10.000 = 230.000
Ratio is 3:2 , so 3+2 = 5.
230.000 / 5 = 46.000
46.000 x 3 = 138.000 - A's share.
46.000 x 2 = 92.000 - B's share ( + 10.000 salary, so in total he got 102.000)
Then see second half of the year when new partner entered.
Profit share changed, and again u deal only with half year profit , another 240.000
But firstly u need to pay rest of salaries out of it , 10.000 to B ; 6.000 to C. (another 6.000 of his salary will be ignored).
Now 240.000 - 16.000 = 224.000 is split using new ratio .
224.000 x 50% = 112.000 - goes to A
224.000 x 25% = 56.000 - goes to B
224.000 x 25% = 56.000 goest to C.
Now conclude:
A = 138.000 + 112.000 = 250.000
B = 10.000 + 92.000 + 10.000 + 56.000 = 168.000
C = 56.000 + 6.000 = 62.000
Total : 480.000
hope it helps :)
well let's see .
Profit was accrued evenly, that means same amount was is deemed to be received every month.
A change in profit share ratio took place in mid year, that means up to this date, half of 480.000 was earned, that is : 480.000 / 2 = 240.000.
Salary of partners is paid first (as far as i remember, check in your book to be sure) that means before you share profit, 10.000 goes to B ,because now u deal with first half of the year, so for half year u take half salary. Leave C's salary apart for now, as he didn't join the partnership yet.
Then u need to share rest of profit : 240.000 - 10.000 = 230.000
Ratio is 3:2 , so 3+2 = 5.
230.000 / 5 = 46.000
46.000 x 3 = 138.000 - A's share.
46.000 x 2 = 92.000 - B's share ( + 10.000 salary, so in total he got 102.000)
Then see second half of the year when new partner entered.
Profit share changed, and again u deal only with half year profit , another 240.000
But firstly u need to pay rest of salaries out of it , 10.000 to B ; 6.000 to C. (another 6.000 of his salary will be ignored).
Now 240.000 - 16.000 = 224.000 is split using new ratio .
224.000 x 50% = 112.000 - goes to A
224.000 x 25% = 56.000 - goes to B
224.000 x 25% = 56.000 goest to C.
Now conclude:
A = 138.000 + 112.000 = 250.000
B = 10.000 + 92.000 + 10.000 + 56.000 = 168.000
C = 56.000 + 6.000 = 62.000
Total : 480.000
hope it helps :)
i am confused with it.........in question the annual salaries of B and C are given, the salary of A is not mentioned.
ah :D
then i misread it :) sorry :)
I have edited the post for correct figures.
then i misread it :) sorry :)
I have edited the post for correct figures.
My frIends, thanks for the explanation. But the answer is 256000 for A, 162000 for B , 62000 for C.
how did you get the answer? I can't get it. please help me to answer it.
hope to know step by step computation, thanks
5y ago#7Partnership accounting is not in the syllabus any longer - it was removed many years ago and cannot be asked in the exam (as you can see, these posts date from ten years ago when it used to be in the syllabus!).
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