Partnership Operations

21

CHAPTER 2
MULTIPLE CHOICE ANSWERS AND SOLUTIONS
2-1:

d
Jordan

Pippen

P120,000

P80,000

( 10,000)

( 10,000)

P110,000

P 70,000

JJ

KK

LL

P18,000

P15,000

P 30,000

)
)
P45,000)

( 6,000)

( 6,000)

( 6,000)

P27,000

P 24,000

P39,000

Allan

Michael

Total
Annual salary
P200,000
Balance, equally
( 20,000)
Total
P180,000
2-2:

2-3:

Total
Bonus (.20 X P90,000)
P 18,000
Interest
JJ (.15 X P100,000)
KK (.15 X P200,000)
LL (.15 X P300,000)
90,000
Balance, equally
( 18,000)
Total profit share
P 90,000
a

2-4:

a
Total
Interest
Allan - .10 X (P40,000 + 60,000 /2)
Michael - .10 X (P60,000 + 70,000/2)
P 11,500
Balance, equally
__28,000
Total

P 5,000

)
P 6,500)

_14,000

_14,000

P 19,000

P20,500 P 28

,000
2-5:

a
Total
Interest (.10 of average capital)
P 22,000
Salaries

Fred

Greg

Henry

P12,000

P 6,000

P 4,000

30,000

20,000

50,000
Balance, equally
(105,000)
Total

( 35,000)

( 35,000)

P 7,000

( P29,000)

( 35,000)
(P11,000) (P 3

3,000)
2-6:

b
Average Capital
Date
January 1
July 1
August 1

Capital
Balance
140,000
180,000
165,000

Months
Unchanged
6
1
5
12

Peso
Months
P 840,000
180,000
__825,000
P1,845,000

Average capital - P1,845,000/12

P153,750

Interest

P 15,375

(P153,750 X 10%)

22

2-7:

Chapter 2

c
Date
January 1
April 1
June 1
September 1

Capital
Balance
P16,000
17,600
19,200
15,200

Months
Unchanged
3
2
3
4
12

Average Capital(P201,600/12) =
2-8:

2-9:

P16,800

a
Net profit before bonus
Net profit after bonus (P24,000/120%)
Bonus to RJ
Balance (P24,000-P4,000)X3/5
Total profit share

P 24,000
__20,000
4,000
__12,000
P 16,000

a
Interest
Salaries
Balance, 3:2
Total

2-10:

Peso
Months
P 48,000
35,200
57,600
__60,800
P201,600

LT
P3,200
15,000
(11,580)
P 6,620

b
Net income after salary, interest and bonus
Add back: Salary (P10,000 X 12)
Interest (P250,000 X .05)

AM
P 3,600
7,500
( 7,720)
P 3,380

Total
P 6,800
22,500
( 19,300)
P 10,000
P467,500

P120,000
__12,500

_132,500

Net income after bonus (80%)

Net income before bonus (P600,000/80%)
Paul's bonus
2-11:

P600,000
_750,000
P150,000

b
CC

DD

EE Total
P 14,000 P 14,

P14,000

P 8,400

Salary
000
Balance
28,000
Additional profit to DD
______
Total

( 1,500)

__2,100

P12,500

P10,500

Net income
Fees Earned
Expenses
Net Income

P90,000
_48,000
P42,000

5,600
(

600)

P 19,000 P 42

,000

Partnership Operations

2-12:

23

c
Interest

LL
P 2,000

MM
P 1,250

NN Total
P 750 P 4,

8,500

9,500

5,700

3,800

_____

__7,050

_____

P20,000

P14,000

P 4,550 P 38,

RR

SS

P15,000

(P10,000)

_47,500

_35,625

_11,875

P62,500

P25,625

P11,875

000
Annual Salary
8,500
Additional profit to give LL, P20,000
19,000*
Additional profit to give MM, P14,000
__7,050
Total
550
*(P9,500/50%) = P19,000
2-13:

a
Excess (Deficiency)
RR (P80,000 - P95,000)
SS (P50,000 - P40,000)
P 5,000
Balance 4:3:1
__95,000
Total
P100,000
Net Income (200,000 - 100,000) =

P100,000

TT

Total
)
)

2-14:

2-15:

b
AA - 100,000 X 10%
150,000 X 20%
P 40,000
Remainder, 210,000
BB (60,000 X .05)
CC (60,000 X .05)
6,000
Balance, equally
_204,000
Total
P250,000
a

AA
P 10,000
30,000

CC

)
P 3,000

__68,000

_68,000

_68,000

P108,000

P71,000

P71,000

BJ

CJ

Total

P4,000
P1,000

12,000

_6,800

__3,400

P7,800

P19,400

c
Total profit share of Pedro
Less: Salary to Pedro
Interest
Share in the balance (40%)

P 50,000
__20,000

Net profit after salary and interest (130,000/40%)

Add: Total Salaries
Total Interest
Total Partnership Income

P150,000
__70,000

P200,000
__70,000
P130,000
P325,000

24

2-17:

Total
)
)

P 3,000

AJ
Bonus to CJ
Net profit before bonus
P44,000
Net profit after bonus (P44,000/110%)P40,000

P4,000
Interest to BJ

1,000
Salaries
P 10,000
22,000
Balance, 4:4:2
__6,800
_17,000
Total
P 16,800
P44,000
2-16:

BB

_220,000
P545,000
Chapter 2

c
Net income before extraordinary gain and bonus (69,600-12,000)
Net income after bonus (57,600/120%)
Bonus to RR

P 57,600
_48,000
P 9,600

Distribution of Net Income:

JJ
Bonus
Balance, equally

P 24,000

RR
P 9,600
24,000

Total
P 9,600
48,000

2-18:

Net profit before extraordinary gain

Extraordinary gain
Total
a
Interest
Annual Salary
Remainder 60:40
Total

2-19:

P 24,000
__4,800
P 28,800

P 33,600
__7,200
P 40,800

P 57,600
_12,000
P 69,600

Mel
P 20,000
36,000
__60,000
P116,000

Jay
P 12,000

_40,000
P 52,000

Total
P 32,000
36,000
_100,000
P168,000

DV
P 15,000

JE
P 3,750

FR Total
(P 7,500)

( 36,875)

( 22,125)

( 14,750)

a
Interest on excess (Deficiency)
P 11,250
Remainder 5:3:2
( 73,750)
Total

(P 21,875)

(P 18,375) (P 22,250) (P 6

2,500)
2-20:

c
Correction of 1998 profit:
Net income per books
Understatement of depreciation
Overstatement of inventory, December 31
Adjusted net income

P 19,500
( 2,100)
( 11,400)
P 6,000
Pete

Rico Total

Distribution of net income per book:

Equally

P 9,750

P 9,750 P 19,

Distribution of adjusted net income

Equally

( 3,000)

( 3,000)( 6,

P 6,750

P 6,750

500
000)
Required Decrease
P 13,500
2-21:

a
Salaries
P164,000
Interest
54,000
Bonus (P360,000-P54,000)X.25
76,500
Remainder, 30:70
__65,500
Total
P360,000

Partnership Operations

Tiger
P 64,000

Woods Total
P100,000

24,000

30,000

76,500

__19,650

__45,850

P184,150

P175,850
25

2-22:

2-23:

a
Salaries
Commission
Interest
Bonus, schedule 1
Remainder, 60:40
Total
Schedule 1
Net income before salary, commission,
interest and bonus
Less: salaries
Net income before bonus
Net income after bonus (P180,000/120%)
Bonus
a

Clotty
P 20,000

32,000
30,000
__35,640
P117,640

Total
Capital balance, beginning
P1,000,000
Additional investment
300,000
Capital withdrawal

Cotto

P 25,000
33,600

_23,760
P 82,360

Total
P 20,000
25,000
65,600
30,000
__59,400
P200,000
P200,000
__20,000
P180,000
_150,000
P 30,000

Mike

Tyson

P600,000

P400,000

100,000

200,000

-200,000

( 100,000)

P500,000

P500,000

P200,000

P300,000 P 50

__60,000

__40,000

P260,000

P340,000 P 60

P760,000

P840,000

( 200,000)

( 300,000) ( 5

P560,000

P540,000

_-

300,000
Capital balance before profit and loss distribution
P1,000,000
Net income:
Salary
0,000
Balance, 3:2
__100,000
Total
0,000
Total
P1,600,000
Drawings
00,000)
Capital balance, end
P1,100,000
2-24:

d
Average Capital - King:
Date
January 1
April 1

Capital
Balance
P40,000
55,000

Months
Unchanged
3
9

Peso
Months
P120,000
_495,000

12

P615,000

Average capital P615,000/12 = P51,250

Average Capital - Queen:
Date
January 1
April 1

Capital
Balance
P100,000
130,000

Months
Unchanged
7
5
12

Peso
Months
P700,000
__650,000
P1,350,000

Average capital - P1,350,000 / 12 =P112,500

26
2-24: Continued

Chapter 2

Distribution of Net Income - Schedule 1

Interest
Bonus, Schedule 2
Salaries
Residual, 50:50
Total

King
P 5,125
12,725
25,000
( 2,050)
P40,800

Queen
P11,250

30,000
_(2,050)
P39,200

Total
P16,375
12,725
55,000
_(4,100)
P80,000

Schedule 2
Net income before allocation
Less: Interest
Net income before bonus
Net income after bonus (P63,625/125%)
Bonus

P80,000
_16,375
P63,625
_50,900
P12,725

Capital Balance December 31:

Capital balance, January 1
Additional investment
Capital balance before profit and
loss distribution
Net income (Schedule 2)
Drawings (P400 X 52)
Capital balance, December 31
2-25:

King
P40,000
_15,000

Queen
P100,000
__30,000

Total
P140,000
__45,000

P55,000
40,800
( 20,800)
P75,000

P130,000
39,000
( 20,800)
P148,400

P185,000
80,000
( 41,600)
P223,400

d
Total receipts (P1,500,000 + P1,625,000)
Expenses
Net income

P3,125,000
( 1,080,000)
P2,045,000

Distribution to Partners
Red P1,500,000/P3,125,000 X P2,045,000 =
Blue P1,625,000/P3,125,000 X P2,045,000 =

P 981,600 (1)
_1,063,400

P2,045,000
Capital balance of Blue Dec. 31
Capital Balance, Jan. 1
Additional investment
Capital balance before profit and
loss distribution
Profit share
Drawings
Capital balance, Dec. 31

P 374,000
___22,000
P 396,000
1,063,400
( 750,000)
P 709,400 (2)

Partnership Operations

2-26:

27

a
Ray

Sam

P150,000

P180,000

_______

__60,000

150,000

240,000

15,000

20,000

51,000

34,000

66,000

54,000

Total
510,000
Salaries
_42,000

216,000

294,000

_18,000

_24,000

Total
552,000
Drawings
(42,000)

234,000

318,000

(18,000)

(24,000)

Total
Capital balances, March 1
P330,000
Additional investment, Nov. 1
__60,000
Capital balances before salaries, profit and Drawings
390,000
Profit share:
Interest
35,000
Balance, 60:40
85,000
Total
120,000

Capital balances, Feb. 28

P510,000
2-27:

P216,000

P294,000

Susan

Tanny

P150,000

P30,000

a
Total
Capital balances, 1/1
P180,000
Additional investment, 4/1

8,000

8,000
Capital withdrawals, 7/1
_(6,000)
Balances before profit distribution
182,000
Profit distribution:
Interest
27,450
Bonus (20% x P30,000)
6,000
Balance, equally
(3,450)

_______

(6,000)

158,000

24,000

23,400

4,050
6,000

Total

(1,725)

(1,725)

21,675

_8,325

179,675

32,325

(12,000)

(12,000)

30,000
Total
212,000
Drawings
(24,000)
Capital balances, 12/31

P167,675

P20,325

P188,000

28
2-28:

Chapter 2
a
Capital balances, beg. 1st year
P300,000
Loss distribution, 1st year:
Salaries
30,000
Interest
30,000
Balance, 5:3:2
(80,000)
Total
(20,000)
Total
280,000

Sin
P110,000

Tan
P80,000

20,000

Uy Total
P110,000
10,000

11,000

8,000

11,000

(40,000)

(16,000)

(24,000)

( 9,000)

( 8,000)

( 3,000)

101,000

72,000

107,000

Drawings
(30,000)
Capital balances, beg. 2nd year
250,000
Profit distribution, 2nd year:
Salaries
30,000
Interest
25,000
Balance, 5:3:2
(15,000)
Total
40,000
Total
290,000
Drawings
_(30,000)
Capital balances, end of 2nd year
P260,000
2-29:

(10,000)

(10,000)

(10,000)

91,000

62,000

97,000

20,000

10,000

9,100

6,200

9,700

( 7,500)

( 4,500)

( 3,000)

21,600

_1,700

16,700

112,600

63,700

113,700

_(10,000)

(10,000)

_(10,000)

P102,600

P53,700

P103,700

Jay
P30,000

Kay
P30,000

Loi Total
P30,000

_(5,000)

_(4,000)

5,000 5,000
______

25,000

26,000

3,000
7,000
_1,000

3,000
_1,000

3,000 9,000
7,000
_1,000

36,000

30,000

39,000

5,000
______

_(3,000)

41,000

27,000

31,000

3,600

3,000

3,900

7,000
_1,500

_1,500

_1,500

53,100

31,500

36,400

______

_(4,000)

53,100

27,500

c
Capital balances, 1/1/06
P90,000
Additional investment, 2006
Capital withdrawal, 2006
_(9,000)
Capital balances
86,000
Profit distribution, 2006:
Interest
Salary
Balance, equally
__3,000
Capital balances, 1/1/07
105,000
Additional investment, 2007
Capital withdrawal, 2002
(11,000)
Capital balances
99,000
Profit distribution, 2007:
Interest
10,500
Salary
Balance, equally
__4,500
Capital balances, 1/1/08
121,000
Additional investment, 2008
Capital withdrawal, 2008
_(6,000)
Capital balances

35,000

5,000
_(8,000)

7,000

6,000 6,000
_(2,000)
40,400

121,000
Profit distribution, 2008:
Interest
12,100
Salary
Balance, equally
___9,900
Capital balances, 12/31/08 per books
P150,000
Understatement of depreciation
(6,000)
Adjusted capital balances, 12/31/08
P144,000

5,310

3,150

3,640

7,000
__3,300

__3,300

__3,300

P68,710

P33,950

P47,340

(2,000)
P66,710

7,000

(2,000)
P31,950

(2,000)
P45,340

Partnership Operations

2-30:

29

a
Ken

Len

Mon

Total
Capital balances, 1/1/07
P300,000
Additional investment, 2007
40,000
Capital withdrawal, 2007
( 20,000)
Balances
320,000
Profit distribution, 2007 (Schedule 1)
Salary
60,000
Balance, beg. Capital ratio
60,000
Capital balances, 1/1/08
440,000
Capital withdrawal, 2008
( 60,000)
Balances
380,000
Profit distribution, 2008:
Salary
60,000
Balance, beg. capital ratio
__60,000
Capital balances, 12/31/08
P500,000
Schedule 1 Computation of net profit:

P100,000

P100,000

P100,000

40,000
( 20,000)

_______

_______

80,000

140,000

100,000
60,000

20,000

20,000

20,000

100,000

160,000

180,000

( 20,000)

( 40,000)

_______

80,000

120,000

180,000
60,000

__13,636

__21,818

__24,546

P 93,636

P141,818

P264,546

Total capital, 2008 (P647,500 P147,500)

Total capital, 2007 (P300,000 + P40,000 P80,000)

P500,000
_260,000

Total profit for 2 years

P240,000

Net profit per year (P240,000 / 2)

2-31:

d
Capital balance, 1/1/08
Additional investment
Withdrawals
Cap. bal. before P/L dist.
NP: Salary (16,500 x 12)
Interest on EC (15%)
Balance 25:30:45
Total
Capital balance 12/31/08

2-32:

P120,000

_Nardo_
P280,000
96,000
376,000
42,000
( 19,875 )
22,125
P398,125

__Orly
P300,000
60,000
( 90,000 )
270,000
198,000
45,000
( 23,850 )
219,150
P 489,150

d
Sam capital, beginning
Additional investment (Land)
Drawings
Capital balance before net profit (loss)
Capital balance, end
Profit share (40%)
Net profit (P50,000 40%)

__Pedro_
P170,000
( 72,000 )
98,000
25,500
( 35,775 )
( 10,275 )
P 87,725
P120,000
60,000
( 80,000 )
100,000
150,000
50,000
P125,000

30

2-33:

_Total_
P750,000
156,000
(162,000)
744,000
198,000
112,500
(79,500 )
231,000
P975,000

Chapter 2

a
__Joe__
Capital balance, 1/2/07
P 80,000
Net loss- 2007:
Annual salary
96,000
10% interest on beg. capital
8,000
Bal. beg. cap. ratio: 8:4
( 108,000)
Total
( 4,000)
Capital balance
76,000
Drawings
( 4,000)
Capital balance, 12/31/07
72,000
Net profit- 2008:
Annual salary
96,000
10% interest on BC
7,200
Bonus to JoeNPBB
P 22000
NPAB (22000/110%)20000 2,000
Balance equally
( 67,300)
Total
37,900
Total
109,900
Drawings
( 4,000)
Capital balance, 12/31/08

105,900

__Tom__
P 40,000

__Total__
P120,000

48,000
4,000
( 54,000)
( 2,000)
38,000
( 4,000)
34,000

144,000
12,000
( 162,000)
( 6,000)
114,000
( 8,000)
106,000

48,000
3,400

144,000
10,600

( 67,300)
( 15,900)
18,100
( 4,000)

2,000
( 134,600)
22,000
128,000
( 8,000)

14,100

120,000

2-34:

2-35:

a
Decrease in capital
Drawings
Contribution
Profit share
Net income (45,000 30)

P 60,000
( 130,000)
25,000
45,000
P150,000

b
2009:
Original profit allocation
Salaries
Balance of profit
Total

Cris
P 80,000
100,000
P180,000

Paul
P 60,000
100,000
P160,000

Bryan
P 60,000
100,000
P160,000

Total
P200,000
300,000
P500,000

Revised profit allocation

Salaries
Interest on capital (Sch. A)
Balance of profit
Total

P 80,000
7,500
91,200
P178,799

P 60,000
13,200
91,200
P164,400

P 60,000
5,700
91,200
P156,900

P200,000
26,400
273,600
P500,000

Difference in total

P (4,400)

P 3,100

1,300

Partnership Operations

31

2-35: Continued

2010
Original profit allocation:
Salaries
Balance of profit
Total

Cris
P 80,000
70,000
P150,000

Paul
P 60,000
70,000
P130,000

Bryan
P 60,000
70,000
P130,000

Total
P200,000
210,000
P410,000

Revised allocation:
Salaries
Interest on capital (Sch. B)
Balance of profit
Total

P 80,000
3,944
66,700
P150,644

P 60,000
2,428
P 66,700
P129,128

P 60,000
3,528
P 66,700
P130,228

P200,000
9,900
P200,000
P410,000

Difference in totals
Total of differences

P
P

P
872
P (3,528)

(644)
656

P
P

(228)
2,872

P
P

0
0

Therefore Paul capital should be increased by P3,528

Schedule A: Revised Computation of Interest on Average Capital
Partner

Date

Capital
Balance

Fraction of
Year Unchanged

Average
Capital

Cris

January 1
March 31
September 30

P180,000
30,000
10,000

3/12
6/12
3/12

P45,000
15,000
2,500
P62,500

Paul

January 1
March 31
September 30

P250,000
80,000
30,000

3/12
6/12
3/12

P62,500
40,000
7,500
P110,000

Bryan

January 1
September 30

P60,000
10,000

9/12
3/12

P45,000
2,500
P47,500

Interest at 12%:
Cris:
Paul:
Bryan:

P62,500 x 12% =
P110,000 x 12%=
P47,500 x 12% =

P7,500
P13,200
P5,700

32

Chapter 2

2-35: Continued

Schedule B: Revised Computation of Interest on Average Capital

Partner
Cris

Date
January 1
March 31

Capital
Balance
P188,700
18,700

Fraction of
Year Unchanged
1/12
11/12

Average
Capital
P15,725
17,142
P32,867

Paul

January 1
March 31

P194,400
4,400

1/12
11/12

P16,200
4,033
P20,233

Bryan

January 1
September 30

Interest at 12%:

P166,900
16,900

1/12
11/12

P13,908
15,492
P29,400

Cris:
Paul:
Bryan:

2-36:

P32,867 x 12% =
P20,233 x 12%=
P29,400 x 12% =

P3,944
P2,428
P3,528

a
Gabriel
P35,000
12,000
11,467
11,280
P69,747

Salaries
Bonus (Sch. A)
Interest on capital (Sch. B)
Remainder of profit
Total

Harry
P40,000
5,333
16,920
P62,253

Cumulative Total
P 75,000
87,000
103,800
132,000

Schedule A: Computation of Bonus to Gabriel

Bonus = 10% (net income Bonus)
110% Bonus = 10% (net income)
110% Bonus = P13,200
Bonus = P12,000
Schedule B: Calculation of average capital balances:
Partner
Gabriel

Date
January 1
April 1
November 1
November 1

Capital Balance
P120,000
140,000
170,000
160,000

Fraction
3/12
512
2/12
2/12

Average Capital
P 30,000
58,333
28,333
26,667
P143,333

Partnership Operations
2-36: Continued:
Partner
Harry

33

Date
January 1
November 1

Interest therefore:
Gabriel:
P143,333 x 8% =
Harry:
P66,667 x 8% =

2-37:

Capital Balance
60,000
100,000

Fraction
10/12
2/12

Average Capital
P50,000
16,667
P66,667

P11,467
P5,333

a
Adjustments to Income:

Amortization of business name

Prepaid expenses, 2009
Accrued expenses, 2009
Fees billed in 2010
Inventory overstatement
Accrued expenses, 2010

2009
P(5,000)
3,000
(2,000)
8,400

2010
P (5,000)
(3,000)
2,000
(8,400)
4,000
(8,600)

Accrued income, 2010

Adjustments to income

P 4,400

(3,000)
P(22,000)

Computations of Adjusted Capital Balances:

Unadjusted balances, December 31, 2010

Bonus to Cory on change in 2009 income (Sch. 1)
Allocation of remaining adjustments to 2009 income
Bonus to Cory on change in 2010 income (Sch. 2)
Allocation of remaining adjustments to 2010 income
Correction of capital withdrawal
Adjusted capital balances, December 31, 2010

Cory
P25,000
400
1,200
(2,000)
(7,000)
(5,000)
P12,600

Dory
P30,000

Eva
P28,000

1,200

1,600

(7,000)

(6,000)

P24,200)

P23,600

Schedule 1:
Bonus = 10% (1 - Bonus)
Bonus = 10% (P4,400 Bonus)
110% Bonus = P440
Bonus = P400
Schedule 2:
Bonus = 10% )1 Bonus)
Bonus = 10% (P22,000 Bonus)
110% Bonus = (P2,200)
Bonus = (P2,000)

34

2-38:

Chapter 2

b
Old Partners Capital Balances before Admission of New Partner:

Capital balances, March 1, 2009

2009 net loss:
Salaries (10 months)
Interest on beginning capital balances
Balance, beginning capital ratio
Total
Total
Drawings
Capital balances, 1/1/2010
2010 net profit:
Salaries
Interest on beginning capital balances
Balance, equally
Total
Total
Drawings
Capital balances, 12/31/010

Alma
P480,000

Betty
P240,000

Total
P720,000

480,000
48,000
(552,000)
(24,000)
456,000
(24,000)
432,000

240,000
24,000
(276,000)
(12,000)
228,000
(24,000)
204,000

720,000
72,000
(828,000)
(36,000)
684,000
(48,000)
636,000

576,000
43,200
(397,800)
221,400
653,400
(24,000)
P629,400

288,000
20,400
(397,800)
(89,400)
114,600
(24,000)
P90,600

864,000
63,600
(795,600)
132,000
768,000
(48,000)
P720,000

Contributed capital of new partner Cora

Agreed capital of Cora (P720,000 + P400,000) x 40%
Bonus from Alma and Betty, original capital ratio(reduction from capital)

P400,000
448,000
P 48,000

Therefore entry a is correct.

Partnership Operations

35

SOLUTIONS TO PROBLEMS
Problem 2 1

1.

Castro
Diaz

:
:

(P26,000/P42,500) x
(P16,500/P42,500) x

P23,800
P23,800

=
=

P14,560
__9,240
P23,800

2.

Castro
Diaz

:
:

(P31,250/P50,000) x
(P18,750/P50,000) x

P23,800
P23,800

=
=

P14,875
__8,925
P23,800

Computation of Average Capitals:

Castro:
Capital
Date
Balances
1/1..................................... P26,000
4/10...................................
29,000
5/1.....................................
36,000

Months
Unchanged
3
1
3

Peso
Months
P 78,000
29,000
108,000

8/1.....................................

32,000

5
12

Average capital = P375,000 12 months =

Diaz:

P31,250

Capital
Date
Balances
1/1..................................... P16,500
6/1.....................................
21,500
9/1.....................................
19,500

Months
Unchanged
5
3
4
12

Average capital = P225,000 12 months =

3.

Peso
Months
P 82,500
64,500
__78,000
P225,000

P18,750

Interest........................................................
Salaries........................................................
Balance, equally..........................................
Total............................................................

Castro
P 7,500
36,000
( 24,100)
P19,400

Diaz
P4,500
24,000
(24,100)
P 4,400

Total
P12,000
60,000
( 48,200)
P23,800

Bonus (a)....................................................
Interest (b)...................................................
Balance, 3:2................................................
Total............................................................

Castro
P 4,760
1,100
_10,764
P16,624

Diaz
P

_7,176
P7,176

Total
P 4,760
1,100
_17,940
P23,800

4.

36

Chapter 2

Computations:
a. Net profit before bonus................................................
Net profit after bonus (P23,800 125%).....................
Bonus...........................................................................
b.

5.

_160,000
P375,000

Castro
Diaz

P23,800
_19,040
P 4,760

Average capital of Castro [(P26,000 + P32,000) 2]...........................

Average of Diaz [(P16,500 + P18,500) 2].........................................
Castro's excess.......................................................................................
Multiply by............................................................................................
Interest...................................................................................................

P29,000
_18,000
P11,000
___10%
P 1,100

:
:

P14,280
__9,520
P23,800

(P3,000/P5,000) x P23,800
(P2,000/P5,000) x P23,800

Problem 2 2

=
=

a.

Average Capital:
Robin:
Date
Jan. 1
Feb. 28
Apr. 30
Sept. 30

Balances
P135,000
95,000
175,000
195,000

Months
Unchanged
2
2
5
3
12

Peso
Months
P270,000
190,000
875,000
__585,000
P1,920,000

Months
Unchanged
3
3
2
2
2
12

Peso
Months
P420,000
600,000
300,000
440,000
__400,000
P2,160,000

Ave. Capital (P1,920,000 12) = P160,000

Hood:

Date

Balances

Jan. 1
Mar. 31
June 30
Aug. 31
Oct. 31

P140,000
200,000
150,000
220,000
200,000

Ave. Capital (P2,160,000 12) = P180,000

Profit Distribution:
Robin : P160,000 P340,000 x P510,000 =
Hood : P180,000 P340,000 x P510,000 =

P240,000
_270,000
P510,000

Partnership Operations

b.
Interest on ave. capital.........................................
Salaries................................................................
Bonus (P510,000 30,600 160,000) x 25%)....
Balance, equally..................................................
Totals...................................................................
c.
Interest:
Robin (P195,000 P135,000) 10%.............
Hood (P200,000 P140,000) 10%..............
Balance, equally..................................................
Totals...................................................................
d.
Salaries................................................................
Bonus (see computations below).........................
Balance, equally..................................................
Totals...................................................................

37

Robin
P 14,400
60,000
78,850
_119,775
P274,025

Hood
P 16,200
100,000

_119,775
P235,975

Total
P 30,600
160,000
79,850
_239,550
P510,000

Robin

Hood

Totals

P 6,000
249,000
255,000

P 12,000
498,000
510,000

Hood
P120,000

Total
P200,000
62,000
_248,000
P510,000

P 6,000
249,000
255,000
Robin
P 80,000
62,000
_124,000
P266,000

_124,000
P244,000

Bonus Computations:
Net income before salaries and bonus.....................................................
Less Salaries...........................................................................................
Net income before bonus........................................................................
Net income after bonus (P310,000 125%)............................................
Bonus......................................................................................................

P510,000
200,000
310,000
_248,000
P 62,000

Problem 2 3
a.

De Villa
P 30,000

De Vera

P 20,000
31,200
9,818
__44,182
P105,200

Salaries................................................................
Commission (2% x P1,000,000)..........................
Interest of 8% on average capital.........................
32,800
Bonus (see computations below).........................
9,818
Balance, equally..................................................
__44,182
Total....................................................................
P116,800
Bonus Computations:
Income before salary, commissions, interest & bonus.............................
Salary and commission (P30,000 + P20,000)..........................................
Interest....................................................................................................
Income before bonus...............................................................................
Income after bonus (P108,000 110%)..................................................
Bonus......................................................................................................
b.

Income Summary.................................................
De Villa, capital..........................................
De Vera, capital..........................................

Total
P 30,000
20,000
64,000
19,636
__88,364
P222,000
P222,000
( 50,000)
( 64,000)
108,000
_98,182
P 9,818

P 222,000
116,800
105,200

38

Chapter 2

Problem 2 4
a.
Salaries...............................................
Bonus (see computation below)..........
Interest (see computation below)........
Balance, 3:3:4.....................................
Total...................................................

East
P15,000
3,760
2,800
__3,180
P24,740

North
P20,000

West
P18,000

4,000
__3,180
P27,180

4,800
__4,240
P27,040

Bonus computations:
Net income before bonus..........................................................................
Net income after bonus (P78,960 105%)................................................
Bonus........................................................................................................
Interest computations:
East (10% x P28,000)...............................................................................
North (10% x P40,000).............................................................................
West (10% x P48,000)..............................................................................
Total..........................................................................................................
b.

East

North

West

Total
P53,000
3,760
11,600
_10,600
P78,960
P78,960
_75,200
P 3,760
P 2,800
4,000
__4,800
P11,600
Total

Interest (see computations below)......

Salaries...............................................
Bonus (see computations below)........
Balance, equally.................................
Total...................................................
Interest computations:
Average capitals:
East:
Date
1/1
5/1
9/1

Balances
P30,000
36,000
28,000

P 3,133
24,000
( 6,056)
P 21,077

P 3,633
21,000
4,280
( 6,055)
P 22,858

P 5,200
25,000
( 6,055)
P 24,145

Months
Unchanged
4
4
4
12

P11,966
70,000
4,280
( 18,166)
P 68,080

Pesos
Months
P120,000
144,000
_112,000
P376,000

Average capital (P376,000 12) .........................................

P 31,333

North:

Pesos
Months
P80,000
124,000
72,000
_160,000
P436,000

Date
1/1
3/1
7/1
9/1

Balances
P40,000
31,000
36,000
40,000

Months
Unchanged
2
4
2
4
12

Average capital (P436,000 12)..........................................

P 36,333

Partnership Operations

39

West:
Date
1/1
4/1
6/1
8/1

Balances
P50,000
57,000
60,000
48,000

Months
Unchanged
3
2
2
5
12

Pesos
Months
P150,000
114,000
120,000
_240,000
P624,000

Ave. capital (P624,000 12)...................................

P 52,000

Interest Computations:
East (10% x P31,333)...........................................................
North (10% x P36,333).........................................................
West (10% x P52,000)..........................................................
Total.....................................................................................

P 3,133
3,633
__5,200
P 11,966

Bonus Computations:
Net income...........................................................................
Less Salary...........................................................................
Net income before bonus......................................................

P 68,000
_21,000
47,080

Net income after bonus (P47,080 110%)...........................

Bonus to North.....................................................................
* To Total
c.

East

West
P 8,990

5,000
__8,237.50
P22,227.50

Total
P 8,990
39,000
12,000
_32,950
P92,940

Bonus Computations:
Net income before salaries & bonus..........................................................
Less Salaries (P21,000 + P18,000)............................................................
Net income before bonus..........................................................................
Net income after bonus (P53,940 120%)................................................
Bonus to West...........................................................................................

P92,940
_39,000
P53,940
_44,950
P 8,990

Bonus (see comp. below)....................

Salaries ..........................................
Interest on beginning capital...............
Remainder, 8:7:5................................
Total..................................................

North

_42,800
P 4,280

P21,000 P 18,000
3,000
4,000
_13,180 _11,532.50
P37,180 P33,532.50

Problem 2 5
a.

Schedule of Income Distribution:

Salaries..............................................
Interest (see computation on p. 30).....
Balance, equally.................................
Total..................................................

Maria
P12,000
7,200
__3,133
P22,333

Clara
P10,000
9,600
__3,133
P22,733

Rita
P 8,000
13,800
__3,134
P24,934

40

Total
P30,000
30,600
__9,410
P70,000
Chapter 2

Problem 2-5: Continued

Interest on Average Capital:

Maria:
P80,000 x 8% x 6 months.......................
P100,000 x 5% x 6 months.....................
Clara:
P120,000 x 8%.......................................
Rita:
P180,000 x 8% x 9 Mos.. . ......................
P150,000 x 8% x 3 Mos.. . ......................
Total...............................................................
b.

P 3,200
__4,000

P 7,200
9,600

P10,800
__3,000

_13,800
P30,600

Statement of Partners Capital:

Balances, Jan. 1..................................
Additional Investment........................
Capital Withdrawal.............................
Net Income.........................................
Drawings ..........................................
Balance, Dec. 31.................................

Maria
P 80,000
20,000

22,333
( 10,000)
P112,333

Clara
P120,000

22,733
( 10,000)
P132,733

Rita
P180,000

( 30,000)
24,934
( 10,000)
P164,934

Total
P380,000
20,000
( 30,000)
70,000
( 30,000)
P410,000

Problem 2 6

1.

Allocation of net loss for 2011:

Salary to Alvin...................................
Interests on average capital:
Alvin (P120,000 x 10%)............
Benny (P200,000 x 10%)...........
Celia (P220,000 x 10%).............
Balance, 30:30:40...............................
Total..................................................

2.

Alvin
P 20,000

Benny

Celia

12,000
20,000
(29,400)
P 2,600

_(29,400)
P( 9,400)

22,000
_(39,200)
P(17,200)

54,000
_(98,000)
P(24,000)

Benny
P180,000
60,000
________
240,000
__(9,400)
230,600
_______
P230,600

Celia
P220,000
40,000
_(20,000)
240,000
_(17,200)
222,800
_______
P222,800

Total
P520,000
100,000
_(20,000)
600,000
_(24,000)
576,000
_(16,000)
P560,000

Statement of Partnership Capital

Year Ended December 31, 2011
Capitals, January 1, 2011....................
Additional investments.......................
Capital withdrawals............................
Balances. ...........................................
Net loss (see above)............................
Balances. ...........................................
Drawings. ..........................................
Capitals, December 31, 2011..............

Alvin
P120,000
_______
120,000
__2,600
122,600
_(16,000)
P106,600

Partnership Operations......................................
Problem 2-6: Continued

3.

Total
P20,000

41

Correcting entry:
Celia capital........................................
2,400
Alvin capital...............................
2,200
Benny capital.............................
200
To correct capital accounts for error in loss allocation computed as follows:
Alvin
Benny
Celia
Correct loss allocation........................
P2,600
P(9,400) P(17,200)
Actual loss allocation.........................
__(400)
__9,600
__14,800
Adjustment.........................................
P2,200
P 200
P ( 2,400)
Problem 2 7

Capital balances, 1/2/09..............................

Additional investment, 2009.......................
Balances. ....................................................
Net income (Loss) - 2009, equally..............
Withdrawals, 2009......................................

Dino
P45,000
_15,000
60,000
(1,800)
(17,000)

Nelson
P45,000
_15,000
60,000
( 1,800)
( 7,000)

Oscar
P45,000
__6,000
51,000
( 1,800)
( 3,200)

Total
P135,000
__36,000
171,000
( 5,400)
( 27,200)

Capital balances, 12/31/09..........................

41,200
Additional investment, 2010....................... _____
Balances. ....................................................
41,200
Net income - 2010, 40: 30: 30.....................
10,800
Withdrawals, 2010...................................... (17,000)
Capital Balances, 12/31/010........................
35,000
Additional investment, 2011....................... ______
Balances. ....................................................
35,000
Net income, 2011 (schedule 1)....................
56,365
Withdrawals, 2011...................................... (19,000)
Capital balances, 12/31/011........................ P72,365

51,200
_____
51,200
8,100
( 7,000)
52,300
______
52,300
42,272
( 9,000)
P86,572

46,000
__6,000
52,000
8,100
( 3,200)
56,900
___6,000
62,900
20,363
( 3,200)
P80,063

138,400
___6,000
144,400
27,000
( 27,200)
144,200
___6,000
150,200
120,000
( 31,200)
P239,000

Nelson
P24,000
10,909
3,600
__4,763
P43,272

Oscar
P12,000

3,600
__4,763
P20,363

Total
P84,000
10,909
10,800
__14,291
P120,000

Bonus computations:
Net income before bonus......................................................................
Net income after bonus (P120,000 110%)..........................................
Bonus to Nelson....................................................................................

P120,000
_109,091
P 10,909

Schedule 1:
Annual salaries...................................
Bonus (see computations below)........
Interest................................................
Balance, equally.................................
Totals..................................................

Dino
P48,000

3,600
_* 4,765
P56,365

* To Total
42
2

Chapter
Problem 2 8
Red, White & Blue Partnership
Statement of Partners' Capital
For Year Ended December 31, 2011

Balances, beginning of year

Add: 20% of fees billed to personal clients
Green's share of fees (Exhibit A)
Remaining net income (Exhibit A)
Subtotals
Less: Withdrawals
Uncollectible accounts identified
with clients of each partner
Excess rent charged to Blue
Total deductions
Balances, end of year

Red
40,200
8,800

White
20,200
4,800

Blue
40,600
4,400

_22,800
_71,800
10,400

_22,800
_47,800
8,800

_11,400
_56,400
11,600

2,400

900

P12,800
P59,000

P 9,700
P38,100

1,800
P13,400
P43,000

Red, White & Blue Partnership

Exhibit A Computation and Division of Net income
For Year Ended December 31, 2011

Green

3,200
______
__3,200
5,000

Total
P101,000
18,000
3,200
_57,000
179,200
35,800

3,300
1,800
P 5,000 P 40,900
P (1,800) P138,300

Total revenue from fees

Expenses, excluding depreciation and doubtful
accounts expense
Less: Excess rent charged to N ($300 x 6)
Subtotal
Add: Depreciation, computed as follows:
$26,000 x 0.10
$10,000 x 0.10 x 1/2
Total expenses, excluding doubtful accounts expense
Add: Doubtful accounts expense ($3,000 x 0.60)
Total expenses

P120,000
P38,700
__1,800
36,900
2,600
____500
P40,000
__1,800
41,800

Net income for year ended Dec. 31

P 78,200

Division of net income:

Fees billed to personal clients:
Red P44,000 x 20%
White P24,000 x 2%
Blue, P22,000 x 20%
Green's share of fees:
Gross fees from new clients after April 1, Year 1
Less: Allocated expenses ($40,000 x $24,000/
$120,000)
Net income from new clients
Green's share (P16,000 x 20%)
Total divided pursuant to special agreement
Balance, divided in income-sharing ratio as follows:
To Red, 40%
To White, 40%
To Blue, 20%
Total
Partnership Operations

P 8,800
48,000
4,400

P18,000

24,000
__8,000
P16,000
P 3,200
__21,200
P 57,000
P22,800
22,800
_11,400
P57,000
43

Problem 2 9
Allan, Eman and Gino Partnership
Statement of Profit Distribution
Year Ended December 31, 2011
Allan

Eman

Interest
Commission (P16,120 P5,000) x 10%
Balance, equally

P 4,000

__5,926

P 750
1,112
_5,925

P 250 P 5,000
1,112
2,224
_5,925 _17,776

Total
Adjustments (50% of P25,000 to Allan)

P 9,926
__2,574

P7,787
(1,287)

P7,287 P25,000
(1,287) _____

Total

P12,500

P6,500

P6,000 P25,000

Problem 2 10

Gino

Total

Gary, Sonny, and Letty Partnership

Statement of Partners' Capital Accounts
Year Ended December 31, 2011
Gary

Sonny

Letty

Total

Capital balances, 1/1/08

Additional investments

P210,000
___9,100

P180,000
_______

P 90,000P480,000
_______ __9,100

Total
Profit distribution:
Salaries
Interest
Bonus to Gary and Sonny (Schedule 1)
Balance, equally

_219,100

_180,000

_90,000 489,100

13,680
25,920

__(9,720)

11,520
21,600

_(9,720)

35,840
58,320

_(9,720)(29,160)

Total

__29,880

_23,400

_11,720 _65,000

Total
Drawings
_(48,000)

248,980
_(21,000)

203,400
101,720 554,100
(18,000) __(9,000)

Capital balances, 12/31/08

P227,980

P185,400

10,640
10,800

P 92,720P506,100

Schedule 1: Computation of the bonus.

Net profit before interest, salaries and bonus
Less:Salaries
Interest
Net profit (loss) before bonus

P 65,000
P35,840
_58,320

__94,160
P(29,160)

Therefore no bonus is to be given to Gary and Sonny.

44
Chapter 2

Problem 2 11
a. Entries to record the formation of the partnership and the events that occurred during 2008:
Cash
Inventory
Land
Equipment
Mortgage payable

1,100,000
800,000
1,300,000
1,000,000
500,000

Installment note payable

Kobe, capital (P600,000 + P800,000
+ P1,000,000 P200,000)
Lebron, capital (P500,000 + P1,300,000
- P500,000)
(1)

Inventory
Cash

200,000
2,200,000
1,300,000
300,000
240,000

Accounts payable
(2)

(3)

(4)

(5)

(6)
(7)

(8)

60,000

Mortgage payable
Interest expense
Cash

50,000
20,000

Installment note payable

Interest expense
Cash

35,000
20,000

Accounts receivable
Cash
Sales

70,000

55,000
210,000
1,340,000
1,550,000

Selling and general expenses

Cash
Accrued expenses payable

340,000

Depreciation expense
Accumulated depreciation

60,000

Kobe, drawing
Lebron, drawing
Cash
Sales

278,000
62,000
60,000
104,000
104,000
208,000
1,550,000

Income summary
(9)

Cost of goods sold

Inventory
P900,000 = P800,000 + P300,000 P200,000

1,550,000
900,000
900,000

Partnership Operations

45

Problem 2-11: Continued

Income summary
Cost of good sold
Selling and general expenses
Depreciation expense
Interest expense

1,340,000
900,000
340,000
60,000
40,000

Income summary
Kobe, capital
Lebron, capital

210,000

Kobe, capital
Lebron, capital
Kobe, drawing
Lebron, drawing

104,000
104,000

105,000
105,000

104,000
104,000

Schedule to allocate partnership net income for 2008:

Profit percentage
Beginning capital balance
P3,500,000
Net income (P1,550,000 revenue
- P 1,340,000 expenses)
Interest on beginning capital
balances (3%)
(105,000)

Kobe
60%
P2,200,000

Lebron
40%
P1,300,000

Total
100%

210,000
66,000

39,000

120,000

120,000

(81,000)

(54,000)

P105,000
Salaries
(240,000)
P(135,000)
Residual deficit
(135,000)
Total
b.

P105,000

P105,000

-0-

Kobe-Lebron Partnership
Statement of Comprehensive Income
For the Year Ended December 31, 2011
Sales
P1,550,000
Less: Cost of goods sold:
Inventory, January 1
Purchases
Goods available for sale
Less: Inventory, December 31
(900,000)
Gross profit
Less: Selling and general expenses
Depreciation expenses
Operating income
Nonoperating expense- interest
Net income

P800,000
300,000
P1,100,000
(200,000)
P650,000
340,000
60,000

400,000
P250,000
(40,000)
P210,000

46
2

Chapter

c.

Kobe-Lebron Partnership
Statement of Financial Position
At December 31, 2011
Assets
Cash
Accounts receivable
Inventory

P1,589,000
210,000
200,000

Land
Equipment (net)
Total assets

1,300,000
940,000
P4,239,000
Liabilities and Capital

Liabilities:
Accounts payable
Accrued expenses payable
Installment note payable
Mortgage payable
Total liabilities
Capital:
Kobe, capital
Lebron, capital
Total capital
Total liabilities and capital

P60,000
62,000
165,000
450,000
P737,000
P2,201,000
1,301,000
3,502,000
P4239,000