Question

2. 1. The partnership contract of A and B provides that net income or losses are to be distributed in the ratio of partner's capital account balances. The appropriate interpretation of this provision is that net income or losses should be distributed in: a. The ratio of the beginning capital account balances b. The ratio of the average capital account balances C. The ratio of ending capital account balance d. One of the foregoing methods to be specified by partners A and B What is the underlying purpose of the salary component of allocating partnership and losses? a. Compensate partners who contribute economic resources to the partnership b. Reward for special responsibilities undertaken c. Reward labor and expertise contributions d. All of the above 3. The partnership contract of Ivan and Irvin provided for salaries of P90,000 to Ivan and P70,000 to Irvin, with any remaining income or loss divided equally. During, 2020, pre salaries income of Ivan and Irvin Co. was P200,000, and both Ivan and Irvin withdrew cash from the partnership equal to 80% of their salary allowance, During 2020, Ivan's equity in the partnership: a. Increase more than Irvin's equity b. Decrease more than Irvin's equity C. Increase the same amount as Irvin's equity d. Decrease the same amount as Irvin's equity A retiring partner withdraws his interest at book value receives assets a. Above his capital interest b. Below his capital interest c. Equal to his capital interest d. None of the choices The following statements are correct, except Admission of new partner by purchase has no effect in total capital of the firm b. Admission of new partner by investment increases the total capital of the firm Admission of new partner by investment using revaluation method affects the new partner capital d. Assignment of interest does not dissolve the business. 4. 5. a. c.

Answer 1

Question 1:-

The correct answer for the question is Option D - One of the foregoing methods to be specified by Partners A and B. When the partnership contract mentions that the net income will be distributed in the ratio of partner's account balances, it can be either in the ratio of the beginning capital account balances/average account balances or ending capital account balances. When the partnership contract mentions as such, the method adopted by the partnership from one of those options should also be mentioned within the contract.

Option A , Option B and Option C are all incorrect as the sharing of profit and losses can be in any particular form based on the capital and needs to be mentioned explicitly in the partnership contract.

Question 2:-

The correct answer for the question is Option D - All the above. The purpose of salary component is to compensate partners, reward special responsibilities and reward labor expertise contributions . When a partner who is part of a partnership puts in his time and efforts, he should be rewarded necessarily. As such, the reward can be in any form that recognizes his contributions. This is the correct answer.

Option A, Option B and Option C are all correct individually but since Option D encompassess all the other options, this is the correct answer.

Kindly note that we are supposed to answer the first question posted per the HOMEWORKLIB RULESs based on which i have answered the first 2 questions above. Request you to post the remaining questions separately so that we can answer them as well. All the best and please let me know if you have any questions via comments :)