PARTNERSHIP

COVERAGE:
FORMATION
OPERATION

PREPARED BY: GROUP 2

WHAT IS
PARTNERSHIP?
It consists of two or more persons bind
themselves to contribute money,
property, or industry to a common
fund, with the intention of dividing the
profit among themselves.
CHARACTERISTICS:
MUTUAL CONTRIBUTION – there cannot be a partnership
without contribution of money, property or industry to a
common fund.
DIVISION OF PROFITS OR LOSSES – the essence of
partnership is that each partner must share in the profits or
losses of the venture.
CO-OWNER OF CONTRIBUTED ASSETS – all assets
contributed into the partnership are owned by the partnership by
virtue of its separate and distinct juridical personality.
MUTUAL AGENCY- Any partner can bind the other partners
to a contract if he is acting within his express or implied authority.
LIMITED LIFE – It may be dissolved by admission,
death, and insolvency, and incapacity, withdrawal of
partner or expiration of the term specified in the
partnership agreement.
UNLIMITED LIABILITY – all partners (except limited
partners), including industrial partners, are personally
liable for all debts incurred by the partnership.
INCOME TAXES – partnership, except general
professional partnerships, are subject to tax rate of 30%
of taxable income.
PARTNERS’ EQUITY ACCOUNTS – Accounting are
much like accounting for sole proprietorships. The
difference lies in the partners’ equity accounts.
 ADVANTAGES AND DISADVANTAGES
OF A PARTNERSHIP

ADVANTAGES VERSUS
PROPRIETORSHIPS
Brings greater financial capability to the
business.
Combines special skills, expertise and
experience of the partners.
Offers relative freedom and flexibility of action
in decision making.
ADVANTAGES VERSUS CORPORATIONS
• Easier and less expensive to organize.
• More personal and informal.

DISADVANTAGES
• Easily dissolved and thus unstable compared
to a corporation.
• Mutual Agency and unlimited liability may
create personal obligations to partners.
• Less effective than a corporation in raising
large amounts of capital.
 CLASSIFICATION OF
PARTNERSHIPS
1. ACCORDING TO OBJECT:
• UNIVERSAL PARTNERSHIP OF ALL PROPERTY.
All contributions become part of the partnership fund.
• UNIVERSAL PARTNERSHIP OF PROFITS. All that
the partners may acquire by their industry or work
during the existence of the partnership and the use of
whatever the partners contributed at the time of the
institution of the contract belong to the partnership.
• PARTICULAR PARTNERSHIP. The object of the
partnership is determinate- its use or fruit, specific
undertaking, or the exercise of a profession or vocation.
2. ACCORDING TO LIABILITY:

• GENERAL. All the partners are liable to the

extent of their separate properties.
• LIMITED. The limited partners are liable
only to the extent of their personal
contributions.
3. ACCORDING TO DURATION:

• Partnership with a FIXED TERM or for a

particular undertaking.
• Partnership AT WILL. One in which no term
is specified and is not formed for any
particular undertaking.
4. ACCORDING TO PURPOSE:

• COMMERCIAL OR TRADING
PARTNERSHIP. One formed for the
transaction of business.
• PROFESSIONAL OR NON-TRADING
PARTNERSHIP. One formed for the exercise
of profession.
5. ACCORDING TO LEGALITY OF EXISTENCE:

• DE JURE PARTNERSHIP. One which has

compiled with all the legal requirements for its
establishment.
• DE FACTO PARTNERSHIP. One which has
failed to comply with all the legal
requirements for its establishment.
 KINDS OF PARTNERS
• GENERAL PARTNER. One who is liable to the extent of
his separate property after all the assets of the
partnership is exhausted.
• LIMITED PARTNER. One who is liable only to the extent
of his capital contribution. He is not allowed to contribute
industry or service only.
• CAPITALIST PARTNER. One who contribute money or
property to the common fund of the partnership.
• INDUSTRIAL PARTNER. One who contributes his
knowledge or personal service to the partnership.
• MANAGING PARTNER. One whom the partner has
appointed as manager of the partnership.
• LIQUIDATING PARTNER. One who is designated to
wind up or settle the affairs of the partnership after
dissolution.
• DORMANT PARTNER. One who does not take active
part in the business of the partnership and not known as a
partner.
• SILENT PARTNER. One who does not take active part in
the business of the partnership though may be known as
partner.
• SECRET PARTNER. One who takes active part in the
business but is not known to be a partner by outside
parties.
• NOMINAL PARTNER OR PARTNER BY ESTOPPEL.
One who is actually not a partner but represents himself
as one.
FORMATION
 LOANS RECEIVABLE FROM OR PAYABLE TO
PARTNERS
If a partner withdraws a substantial amount of
money with the intention of repaying it. The journal
entry should be:

Loans Receivable-Partner Account xx

Cash xx

Instead of Drawings account and it should be

separated from other receivables of the partnership.
A partner may lend amounts to the partnership in
excess of his intended permanent investment.

Cash XX
Loans Payable-Partners Account XX
 
Not to Partners Capital Account but considered as
Liability and should be separated in presentation.
This distinction is important in case of liquidation.
Loans Payable to partners must be paid after
claims of outside creditors have been paid full.
These loans have priority over partner’s equity.
VALUATION OF INVESTMENTS BY PARTNERS
Partners may invest cash or non-cash assets in the partnership. When the
partner invests non-cash assets, they are to be recorded at values AGREED
UPON BY THE PARTNERS. In the absence of any agreement, the
contributions will be recognized at their FAIR MARKET VALUES at the date
of transfer to the partnership.

FAIR MARKET VALUE- Of an asset is the estimated amount that a willing

seller would receive from a financially capable buyer for the sale of the
asset in a free market.
FAIR VALUE- is the price at which an asset or liability could be exchanged in
a current transaction between knowledgeable, unrelated willing parties.

BE CAREFUL! (BOOK VALUE, NET REALIZABLE VALUE, AT COST,)

 ADJUSTMENT OF ACCOUNTS PRIOR TO
FORMATION
ILLUSTRATION:
Emerita Geron and Emerita Modesto formed a general professional partnership.
Emerita Geron will invest sufficient cash to get an equal interest in the partnership
while Emerita Modesto will transfer the assets and liabilities of her business. The
account balance on the books of Modesto prior to partnership formation follows:
  BOOK VALUE FAIR MARKET VALUE
DR CR DR CR
CASH 490,000   180,000
 
 
ACCOUNTS RECEIVABLE 590,000   300,000  
OFFICE EQUIPTMENT 900,000   1,500,000  
ACCUMULATED DEPRECIATION   250,000   600,000
ACCOUNTS PAYABLE   300,000   155,000
SALARIES PAYABLE   90,000   25,000
MODESTO.CAPITAL   1,340,000   1,200,000
It is agreed that for the purpose of establishing
Emerita Geron’s interest, the following
adjustments shall be made in the books of
Modesto:

• An allowance for uncollectible accounts of 5%

of accounts receivable is to be established.
ADJ.1
Emerita Modesto, Capital 15,000
AFUA 15,000
• Prepaid expenses amounting to 30,000 were
omitted by the accountant.

ADJ2
Prepaid Expenses 30,000
Emerita Modesto, Capital 30,000
• Additional salaries payable in the amount of
10,000 is to be established.

ADJ. 3
Emerita Modesto, Capital 10,000
Salaries Payable 10,000
 TYPES OF FORMATION
1. INDIVIDUALS WITH NO EXISTING BUSINESS
FORM A PARTNERSHIP.
2. CONVERSION OF A SOLE PRIETORSHIP TO A
PARTNERSHIP.
• A sole proprietor and an individual without an
existing business form a partnership.
• Two or more sole proprietors form a partnership.
3. ADMISSION OR RETIREMENT OF A PARTNER.
 INDIVIDUALS WITH NO EXISTING BUSINESS
FORM A PARTNERSHIP
ILLUSTRATION:

On July 1, 2020, Kufra-san Humay and Mumay

President agreed to form a partnership. The
partnership agreement specified that Humay is
to invest cash of 700,000 and President is to
contribute land with a fair market value of
1,300,000 with 1,500,000 book value and
300,000 mortgage to be assumed by the
partnership.
Entries:

Cash 700,000
Land 1,300,000
Mortgage Payable 300,000
Humay, Capital 700,000
President, Capital 1,000,000
 Humay and President
Statement of Financial Position
July 1, 2020
 
ASSETS
Cash P 700,000
Land 1,300,000
Total Assets P2, 000,000
 
LIABILITY AND OWNERS EQUITY
 
Mortgage Payable P 300,000
Humay, Capital 700,000
President, Capital 1,000,000
Total Liabilities and O.E. P 2,000,000
 CONVERSION OF A SOLE PRIETORSHIP TO A PARTNERSHIP
ILLUSTRATION:
The statement of financial position of Kagura’s Umbrella on October 1, 2021 before accepting Mark Kevin as partner is known as
follows:
 

KAGURA’S UMBRELLA
Statement of Financial Position
October 1, 2021
 
Assets
Cash P60,000
Notes Receivable 30,000
Accounts ReceivableP240,000
Less: AFUA 10,000 230,000
Merchandise Inventory 80,000
Furniture and Fixtures P60,000
Less: Accumulated Dep. 6,000 54,000
Total Assets P454,000
 
Liabilities and Owners Equity
Notes Payable P 40,000
Accounts Payable 100,000
Kagura’s Umbrella, Capital 314,000
Total Liability and Owners Equity P454,000
Mark Kevin offered to invest cash to get a capital credit equal to
one-half of Kagura’s Capital after giving adjustments below.
Kagura’s accepted the offer.
 
• Merchandise is to be valued at 74,000.
• The accounts Receivable is estimated to be 95% collectible.
• Interest accrued on the notes receivable will be recognized:
10,000 12% dated July 1, 2021 and 20,000, 12% dated August 1,
2021.
• Interest on Notes Payable to be accrued at 14% annually from
April 1, 2020.
• The furniture and fixtures are to be valued at 46,000.
• Office supplies on hand that have been charge to expense in the
past amounted to 4,000. These will be used by the partnership.
NEW BOOK FOR PARTNERSHIP (required per National Internal
Revenue Code)

The following procedures may be used in recording the formation

of the partnership:
 
Books of Kagura’s Umbrella:
• Adjust the assets and liabilities of Kagura’s in accordance with
the agreement. The adjustments are made to his capital Account.
• Close the book.
 
Books of the partnership:
• Record the investment of Kagura’s Umbrella
• Record the investment of Mark Kevin
 (1)
 
Kagura’s Capital 14,100
Office Supplies 4,000
Interest Receivables 700
Merchandise Inv. 6,000
AFUA 2,000
Interest Payable 2,800
Accumulated Dep. 8,000
 (2)
Notes Payable 40,000
Accounts Payable 100,000
Interest Payable 2,800
AFUA12,000
Accumulated Dep. 14,000
Kagura’s Capital 299,900
Cash 60,000
Notes Receivable 30,000
Accounts Receivable 240,000
Interest Receivable 700
Merchandise Inventory 74,000
Office Supplies 4,000
Furniture and Fixtures60,000
 BOOKS OF THE PARTNERSHIP
(1)
Cash 60,000
Notes Receivable 30,000
Accounts Receivable 240,000
Interest Receivable 700
Merchandise Inventory 74,000
Office Supplies 4,000
Furniture and Fixture 60,000
Notes Payable 40,000
Accounts Payable 100,000
Interest Payable 2,800
AFUA12,000
Kagura’s Capital 299,900
 (2)

Cash 149,950
Mark Kevin, Capital 149,950
 KAGURA’S and MARK KEVIN
Statement of Financial Position
October 1, 2021
  Assets
Cash P209,905
Notes Receivable 30,000
Accounts Receivable P240,000
Less: AFUA 12,000 228,000
Interest Receivable 700
Merchandise Inventory 74,000
Office Supplies 4,000
Furniture and Fixtures 46,000
Total Assets P592,650
 
Liabilities and Owners Equity
Notes Payable P 40,000
Accounts Payable 100,000
Interest Payable 2,800
Mark Kevin, capital 149,950
Kagura’s Umbrella, Capital 299,900
Total Liability and Owners Equity P592,650
 Two or more sole proprietors form a
partnership.
ILLUSTRATION:

On June 30, 2021, Sizzling Hot and President

Assassin, friendly competitors in a certain line
business, decided to combine their talents and
capital to form a partnership. Their statements
of Financial Position are as follows:
 Sizzling Hot
Statement of Financial Position
June 30, 2021
 
Assets
Cash P 50,000
Accounts Receivable 100,000
Merchandise Inventory 80,000
Furniture and Fixtures 60,000
Total Assets P 290,000
 
Liability and Owners Equity
Accounts Payable P30,000
Sizzling Hot, Capital 260,000
Total Liability and Owners Equity P290,000
 President Assassin
Statement of Financial Position
June 30, 2021
 
Assets
Cash P40,000
Accounts Receivable 80,000
Merchandise Inventory 100,000
Delivery Equipment 90,000
Total Assets P310,000
 
Liability and Owners Equity
Accounts Payable P60,000
President Assassin, Capital 250,000
Total Liability and OE P310,000
 
The Condition and adjustments agreed upon by the partners for
purpose of determining their interest in the partnership are:
 
• Actual count and Bank reconciliation on Sizzling Hot
proprietorship cash account revealed cash short and
unrecorded expenses P3, 500.
• Establishment of a 10% allowance for uncollectable accounts
in each book.
• The merchandise Inventory of President Assassin is to be
increased by P10,000.
• The Furniture and Fixtures of Sizzling Hot are to be
depreciated by P6,000.
• The delivery equipment of President Assassin is to be
depreciated by P9,000.
 BOOKS OF SIZZLING HOT
(1)
Sizzling Hot, Capital 19,500
Cash 3,500
AFUA10,000
Accumulated Dep. 6,000
(2)
Accounts Payable 30,000
AFUA10,000
Accumulated Dep. 6,000
Sizzling Hot, Capital 240,500
Cash 46,500
Accounts Receivable 100,000
Merchandise Inventory 80,000
Furniture and Fixtures 60,000
 BOOKS OF PRESIDENT ASSASSIN
(1)
Merchandise Inventory 10,000
President Assassin, Capital 7,000
AFUA8,000
Accumulated Dep 9,000
 
(2)
Accounts Payable 60,000
AFUA8,000
Accumulated Dep 9,000
President Assassin, Capital 243,000
Cash 40,000
Accounts Receivable 80,000
Merchandise Inventory 110,000
Delivery Equipment 90,000
 BOOKS OF THE PARTNERSHIP
(1)
Cash 46,500
Accounts Receivable 100,000
Merchandise Inventory 80,000
Furniture and Fixtures54,000
Accounts Payable 30,000
AFUA10,000
Sizzling Hot, Capital 240,500
 
(2)
Cash 40,000
Accounts Receivable 80,000
Merchandise Inventory 110,000
Delivery Equipment 81,000
Accounts Payable 60,000
AFUA8,000
President Assassin, Capital 243,000
 Sizzling Hot and President Assassin
Statement of Financial Position
June 30,2021
 
 
Assets
Cash P 86,500
Accounts Receivable 180,000
Less: AFUA 18,000 162,000
Merchandise Inventory 190,000
Furniture and Fixtures 54,000
Delivery Equipment 81,000
Total Assets P 573,500
 
Liability and O.E
Accounts Payable P90,000
President Assassin, Capital 243,000
Sizzling Hot, Capital 240,500
Total Liab and OE P573,500
 
OPERATION
 RULES FOR DISTRIBUTION OF PROFITS OR LOSSES

The profits or losses shall be distributed in conformity

with the agreement. If only the share of each partner in
the profits has been agreed upon, the share of each in
losses shall be in the same proportion.
 
In the absence of stipulation, the share of each partner in
profits or losses shall be in proportion to what he may
have contributed but the industrial partner may not be
liable for the losses.
 
A summary of the above legal provisions is
prepared as follows:
1. PROFITS
• The profits will be divided according to partners’
agreement.
• If there is no agreement:
– As to capitalist partners, the profits shall be divided
according to their CAPITAL CONTRIBUTION.
– As to Industrial partners, such share as may be just and
equitable under the circumstances, provided that the
industrial partner shall receive such share before the
capitalist partners shall divide the profits.
2. LOSSES
• The losses will divide according to partners’
agreement.
• If there is no agreement as to distribution of
losses but there is an agreement as to profit, the
losses shall be distributed according to the profit
sharing ratio.
• In the absence of any agreement
– As to capitalist partner, the losses shall be divided
according to their capital contributions.
– As to purely industrial partners, shall not be liable for
any losses.
 DISTRIBUTION OF PROFITS OR LOSSES BASED ON PARTNERS’
AGREEMENT

The partners may agree on any of the following scheme in distributing profits or losses:
 
• Equally or in other agreed ratio
• Based on partners’ capital contributions:
– Ratio of original capital investments
– Ratio of capital balances at the beginning of the year
– Ratio of capital balances at the end of the year
– Ratio of average capital balances
• By allowing interest on partners’ capital and the balance in an agreed ratio
• By allowing salaries to partners and the balance in an agreed ratio
• By allowing bonus to the managing partner based on profit and the balance in an
agreed ratio.
• By allowing salaries, interest on partners’, bonus to the managing partner and the
balance in an agreed ratio (combination of 3 to 5)
 
ILLUSTRATION:
 
Leopoldo Medina invested 400,000 on Jan 1, 2021 and
additional 100,000 on April 1. Edgar Detoya invested
800,000 on Jan 1, 2021 and withdrew 50,000 on July 1. The
Medina and Detoya partnership which had a profit of
300,000 for year ended Dec 31, 2021, the first year of
operations. The partnership contract provided that each
partner may withdraw 5,000 on the last day of each
month; both partners did so during the year. The drawings
are recorded by debits to the partners’ drawing accounts
and shall not be considered profit or loss. It is the intention
of the partners that each partners share in the profit or
loss be either credited or debited to the drawing account.
 Leopoldo Medina, Capital Edgar Detoya, Capital

  Jan. 1 400,000
July 1 50,000 Jan. 1 800,000
  April 1 100,000

Edgar Detoya, Drawing

Leopoldo Medina, Drawing

Jan-Dec 60,000  
Jan-Dec 60,000  

Income Summary

  Dec 300,000
1. EQUALLY OR IN OTHER AGREED RATIO

(PROFIT)
 
Income Summary 300,000
Leopodo Medina, Drawing 150,000
Edgar Detoya, Drawing 150,000
 
(LOSS) Incurred loss 200,000
 
Leopodo Medina, Drawing 100,000
Edgar Detoya, Drawing 100,000
Income Summary 200,000
 
(RATIO 60:40)
 
Income Summary 200,000
Leopodo Medina, Drawing 180,000
Edgar Detoya, Drawing 120,000
2. BASED ON PARTNERS’ CAPITAL CONTRIBUTIONS

A. RATIO OF ORIGINAL CAPITAL INVESTMENT

 
Income Summary 300,000
Leopoldo Medina, Drawing 100,000
Edgar Detoya, Drawing 200,000
 
Computation:
 
Medina: 300,000 X 400,000 / 1,200,000
Detoya: 300,000 X 800,000 / 1,200,000
B. RATIO OF CAPITAL BALANCES AT THE BEGINNING OF
THE YEAR

Income Summary 300,000

Leopoldo Medina, Drawing 100,000
Edgar Detoya, Drawing 200,000
 
Computation:
 
Medina: 300,000 X 400,000 / 1,200,000
Detoya: 300,000 X 800,000 / 1,200,000
C. RATIO OF CAPITAL BALANCES AT THE END
OF THE YEAR
Income Summary 300,000
Leopoldo Medina, Drawing 120,000
Edgar Detoya, Drawing 180,000
 
Computation:
 
Medina: 300,000 X 500,000 / 1,200,000
Detoya: 300,000 X 750,000 / 1,200,000
D. RATIO OF AVERAGE CAPITAL BALANCES

MEDINA:
COMPUTATION OF THE AVERAGE CAPITAL
BALANCES
DATE CAPITAL BALANCES YEAR UNCHANGE AVE. CAPITAL

JAN 1 400,000 3/12 100,000

APR1 500,000 9/12 375,000

AVERAGE CAPITAL 475,000

DETOYA:
COMPUTATION OF THE AVERAGE CAPITAL
BALANCES
DATE CAPITAL BALANCES YEAR UNCHANGE AVE. CAPITAL

JAN 1 800,000 6/12 400,000

APR1 750,000 6/12 375,000

AVERAGE CAPITAL 775,000

Income Summary 300,000
Leopoldo Medina, Drawing 114,000
Edgar Detoya, Drawing 186,000
 
Computation:
 
Medina: 300,000 X 475,000 / 1,250,000
Detoya: 300,000 X 775,000 / 1,250,000
 3. BY ALLOWING INTEREST ON PARTNERS’
CAPITAL AND THE BALANCE IN AN AGREED RATIO

To allow interest on partners’ capital account

balances is almost similar to dividing part of
profits in the ratio of partners’ capital balances.
If the partners agree to allow interest on capital
as a first step in the division of profit, they
should specify the interest rate to be used.
Illustration:
Assume that the partnerships agreements allowed 15% interest on average
capital account balances, with the balance to be divided equally. The profit of
300,000 for 2021 is divided as follows:
  Medina Detoya Total
15% interest on ave. capital
     
Medina 475,000 X 15%
71,250    
Detoya 775,000 X 15%
  116,250  
Subtotal
  187,500
Balance divided equally
     
Medina 50% 56,250    
Detoya 50%   56,250 112,500
Share Profit 127,500 172,250 300,00

Income Summary 300,000

Leopoldo Medina, Drawing 127,500
Edgar Detoya, Drawing 172,500
The partnership incurred loss of 10,000.
  Medina Detoya Total
15% interest on ave.
capital      
Medina 475,000 X 15%
71,250    
Detoya 775,000 X 15%
  116,250  
Subtotal
  187,500
Balance divided equally
     
Medina 50% (98,750)    
Detoya 50%   (98,750) (197,500)
Share Profit (27,500) 17,500 (10,000)

Leopoldo Medina, Drawing 27,500

Income Summary 10,000
Edgar Detoya, Drawing 17,500
 4. By allowing salaries to partners and the
balance in an agreed ratio
Assume that the partnership agreement
provided for an annual salary of 100,000 to
Medina and 60,000 to Detoya and the balance
to be divided equally. Profit is 300,000.
  Medina Detoya Total
Income Summary 300,000
Salary
allowances 100,000 60,000 160,000 Leopoldo Medina, Drawing 170,000
Edgar Detoya, Drawing 130,000

Balance divided
equally      

Medina 50% 70,000    

Detoya 50%   70,000 140,000
Share Profit 170,000 130,000 300,00
5. By allowing bonus to the managing partner based on
profit and the balance in an agreed ratio.

A partnership contract may provide for a special

compensation in the form of BONUS to a
managing partner when the results of
operations of the partnership are favorable.

• Before Bonus
• After Bonus
 
 BEFORE BONUS
Assume that the partnership agreement provided for a bonus of 25% of profit before
bonus to partner Medina and the balance to be divided equally. The profit is 300,000
  Medina Detoya Total
Bonus
75,000   75,000
Income Summary 300,000
Balance
divided       Leopoldo Medina, Drawing 187,500
equally Edgar Detoya, Drawing 112,500
Medina
50%
112,500    
Detoya
50%
  112,500 225,000
Share
Profit
187,500 112,500 300,000
AFTER BONUS
  Medina Detoya Total
Bonus
60,000   60,000
Profit before bonus 300,000 125%
Balance
      Profit after bonus 240,000 100%
divided equally
Bonus 60,000 25%
 
Medina
50%
120,000    

Detoya 50%   120,000 240,000

Share Profit 180,000 120,000 300,000

Income Summary 300,000

Leopoldo Medina, Drawing 180,000
Edgar Detoya, Drawing 120,000
 6. By allowing salaries, interest on partners’, bonus to the
managing partner and the balance in an agreed ratio

Assume that the profit for the year 400,000 and the
partnership agreement for the Medina and Detoya
Partnership provided for the following:
 
• Bonus to medina of 25% of profit after salaries and interest
but before bonus.
• Annual salaries of 100,000 to medina and 60,000 to Detoya.
• Interest on average capital balances of 71,250 and 116,250
to medina and Detoya respectively
• Balances to be divided in a ratio of 40:60
   Medina Detoya Total
Salary allowances
100,000 60,000 160,000
Interest on Average
Capital 71,250 116,250 187,500
Before Bonus 25%
13,125   13,125
Balance divided
equally      
Medina 40% 15,750    
Detoya 60%   23,625 39,375
Share Profit 200,125 199,875 400,000

Income Summary 400,000

Leopoldo Medina, Drawing 200,125
Edgar Detoya, Drawing 199,875
Assume Bonus to medina of 25% of profit after salaries and interest but after
bonus.
  Medina Detoya Total
Salary allowances
100,000 60,000 160,000
Interest on Average Capital
71,250 116,250 187,500
AFTER Bonus 25%
10,500   10,500
Balance divided equally
     
Medina 40% 16,800    
Detoya 60%   25,200 42,000
Share Profit 198,550 201,450 400,000

Income Summary 400,000

Leopoldo Medina, Drawing 198,550
Edgar Detoya, Drawing 201,450