Question

philips and case are in the process of forming to import belgian chocolates, to which philip will contribute one third time and case full time. They have discussed the following alternative plans for sharing profit and losses
a. in the ratio of their initial investment which they have agreed will be $196000 for philip and $294000 for case.
b. in prportion to the time devoted to the business
c. a salary allowance of $ 5000 per month to Case and the balance in accordance with their initial investment ratio
d. a $ 5000 per month salary allowance to Case 10% interest on their investment and the balance equally
The partners expect the business to generate profit as follows: Year 1, $109000 loss, year2 $159000 profit and year 3 $ 259000 profit
required
complete a schedule for each of the four plans being considered by showing how the partnership profit or loss for eavh year would be allocated to the partners

Answer 1

Distribution of Partnership Profit/Loss

Part a) In Ratio of Investment i.e Ratio of 40:60

Profit/Loss	Philip	Case
Year1 (109000) Loss	43600	65400
Year 2 159000 Profit	63600	95400
Year 3 259000 Profit	103600	155400

Part b) In Ratio of Time  i.e Ratio of 1:3

Profit/Loss	Philip	Case
Year1 (109000) Loss	27250	81750
Year 2 159000 Profit	39750	119250
Year 3 259000 Profit	64750	194250

Part c) salary allowance of $ 5000 per month to Case and the balance in accordance with their initial investment ratio

Profit/Loss	Philip	Case
Year1 (109000) Loss	19600	60000+29400=89400
Year 2 159000 Profit	39600	60000+ 59400=119400
Year 3 259000 Profit	79600	60000+119400=179400

Part d) $ 5000 per month salary allowance to Case 10% interest on their investment and the balance equally

Profit/Loss	Philip	Case
Year1 (109000) Loss	19600	60000+29400= 89400
Year 2 159000 Profit	19600+25000=44600	60000+ 59400 +25000=114400
Year 3 259000 Profit	19600+75000=94600	60000+29400+75000=164400