BASIC ACCOUNTING - PARTNERSHIP AND CORPORATION

Partnership Operations

PROBLEM SOLVING QUESTIONS.

Problem 1.

Borres, Buendia, and Bustos have capital balances of P 250,000, P 150,000 and P 100,000, respectively. Time devoted by the
partners in the partnership follows:

 Borres - three-fourths time

 Buendia - one-fourth time

 Bustos - one-half time

Instructions: Determine the participation of the partners in the profit of P 600,000 if profit is divided:

1. In the ratio of capital investments.

2. In the ratio of time devoted in the business.

Problem 2.

Banal and Benson are partners. Their capital accounts during the fiscal year 2014 were as follows:

Banal Benson

9/1 120,000 1/1 800,000 3/1 180,000 1/1 1,200,000

4/1 160,000 7/1 140,000

11/1 60,000 10/1 100,000

Profit of the partnership is P 250,000 for the year. The partnership agreement provides for the division of profits as follows:

1. Each partner is to be credited 10% interest on his average capital.

2. Any remaining profit or loss is to be divided equally.

Instructions: Prepare the entry to record the closing of profit to the partners’ capital accounts.

Problem 3.

The partnership of Benito and Bunye has the following provisions in the partnership agreement:

1. A partner earns 10% interest on the excess of his average capital over the other partner.

2. Benito and Bunye are allowed annual salaries of P 300,000 and P 200,000, respectively.
 3. Any remaining profit or loss is to be divided in the ratio of 70:30.

The average capital of Benito is P 1,000,000 and that of Bunye is P 600,000.

Instructions: Prepare a profit distribution schedule assuming the profit of the partnership is (a) P 700,000, and (b) P 600,000.

Problem 4.

Blanco and Banda formed a partnership by investing P 120,000 and P 180,000, respectively. At the end of its first year of
operations, the partnership has realized a profit of P 120,000.

Instructions: Determine the distribution of profit under each of the following independent assumptions:

1. The partnership agreement does not mention profit sharing.

2. Profit is to be divided in the ratio of the original investments.

3. Interest at 8% is to be allowed on the original capital investments and the balance to be divided equally.

4. Salaries of P 54,000 and P 45,000 respectively and the balance to be divided equally.

5. Interest at 10% is to be allowed on the original capital investments, salaries of P 50,000 and P 75,000 to partners,
respectively and the balance to be divided in the ratio 2:3. in case of insufficient net income, this has to be distributed in
the salary ratio. While if there is a net loss, then it has to be divided equally.

Problem 5.

Bueno and Beran have capital balances at the beginning of the year of P 600,000 and P 675,000, respectively. They share profit as
follows:

1. Interest of 8% on beginning capital balances.

2. Salary allowance of P 225,000 to Bueno and P 115,000 to Beran.

3. Balances in the ratio of 3:2.

The partnership realized a profit of P 375,000 during the current year before interest and salary allowances to partners.

Instructions:

1. Show how the profit of P 375,000 should be divided between Bueno and Beran.

2. Assuming that Bueno and Beran simply agree to share profit in a 3:2 ratio with a minimum of P 175,000 guaranteed to
Beran, show how the profit of P 375,000 should be divided.

Problem 6.
Belen and Basco formed a partnership on January 2, 2014 and agreed to share profit 90% and 10%, respectively. Belen invested
no assets but has a specialized expertise and manages the firm full time. There were no withdrawals during the year. The
partnership contract provides the following:

1. Capital accounts are to be credited annually with interest at 10% of beginning capital.

2. Basco is to be paid a salary of P 8,000 a month.

3. Basco is to receive a bonus of 25% calculated before deduction of salary and interest on capital accounts.

4. Bonus, interest, and Basco’s salary are to be considered as expenses.

The fiscal year 2014 income statement for the partnership includes the following:

Revenue P 701,600

Expenses (including salary, interest and bonus) 379,600

Profit P 322,000

Instructions: Determine the amount of bonus to be credited to Basco.

Problem 7.

Banzon is the managing partner of Power Partnership. He is given an incentive of 5% bonus on profit. The profit of the
partnership is P 650,000 and income tax rate is 30%.

Instructions: Determine the amount of bonus under each of the following assumptions.

1. Bonus is computed based on profit before deduction for bonus and income tax.

2. Bonus is computed based on profit after deduction for bonus but before deduction for income tax.

3. Bonus is computed based on profit before deduction for bonus but after deduction for income tax.

4. Bonus is computed based on profit after deduction for both bonus and income tax.

Problem 8:

Balbin, Bagtas and Banta are partners sharing profits 40%, 35% and 25%. Partners’ original capital were in this ratio but on June
30, 2014, capital balance are as follows: Balbin - P 200,000, Bagtas - P 200,000, and Banta - P 200,000. Partners want to bring
capital balances into profit and loss ratio.

Instructions:

1. Assuming that the capital balances are to be brought into the profit and loss ratio by payments outside the firm among
partners, the total firm capital to remain the same, what cash transfers are required between or among partners and what entry
would be made on the firm books?

2. Assuming that the capital balances are to be brought into the profit and loss ratio by the lowest cash investment in the firm
by the partners, what additional investments are required and what entry would be made on the firm books?
3. Assuming that the capital balances are to be brought into the profit and loss ratio by the lowest possible additional cash
investment or cash withdrawal from the firm by the partners, what additional cash investments or cash withdrawals are required
and what entry would be made in the firm books?

Problem 9:

Barte, a partner in the BBB Partnership, has a 25% participation in profit. Barte’s capital account had a net decrease of P 240,000
during the year 2014. During 2014, Barte withdrew P 520,000 (charged against his capital account) and invested in the partnership
a property with a fair value of P 100,000.

Instructions: Determine the profit of the BBB Partnership for the year 2014.

Problem 10.

The capital accounts of Bondoc and Barba at the end of the fiscal year 2014 are as follows:

Bondoc, Capital

January 1 Balance P210,000

May 1 Investment 90,000

October 1 Withdrawal P 60,000

Barba, Capital

January 1 Balance P 150,000

April 1 Withdrawal P 30,000

The partnership profit for the year ended December 31, 2014 is P 300,000.

Instructions: Give the journal entries to record the transfer of profit to the capital accounts under each of the following
assumptions (Show the procedure used in calculating the respective amounts as an explanation for each entry).

1. Profit is to be divided 60% to Bondoc and 40% to Barba.

2. Profit is to be divided in the ratio of capital balances at the beginning of the period.

3. Profit is divided in the ratio of average capital.

4. Interest at 8% is allowed on average capital and the balance of profit is divided equally.

5. Salaries of P 60,000 and P 48,000 are allowed to Bondoc and Barba respectively, and the balance of profit is to be divided in
the ratio of capital balances at the end of the period.

6. Bondoc is allowed a bonus of 33 and 1/3% of profit after bonus and the balance of the profit is divided in the ratio of the
average capital.
Problem 11.

Bernal and Burgos formed a partnership on January 1, 2014. the changes in the respective capital balances during the year ended
December 31, 2014 are presented. During the year, the partnership earned a profit of P 350,000.

Bernal, Capital Burgos, Capital

10/31 60,000 1/1 360,000 6/30 80,000 1/1 440,000

5/31 100,000 10/31 140,000

Instructions. Prepare the entry to record the allocation of the partnership profit to individual capital accounts under each of the
following assumptions:

1. Each partner receives 8% interest on beginning-of-the-year capital balances and the remainder is divided between Bernal and
Burgos in the ratio of 3:1, respectively.

2. Bernal and Burgos are given annual salaries of P 70,000 and P 130,000, respectively, 12% interest on the end-of-the-year
capital balances, and the remainder is divided equally.

3. Bernal and Burgos are given salaries of P 45,000 and P 85,000, respectively, 12% interest on average capital balances, and
the remainder divided in the ratio of 3:1.

4. Bernal and burgos are given salaries of P 50,000 and P 100,000, respectively, 10% interest on average capital balances, and
the remainder divided 40% to Bernal and 60% to Burgos.

5. Each partner receives 8% interest on beginning-of-the-year capital balances and a salary of P 50,000. Bernal receives a bonus
of 10% of profit after deducting interest and salaries, and the remainder is divided in the ratio of 2:3.

Problem 12.

The partners of BBB Partnership are Bilbao, Bertol and Borja. During the current year their average capital balances are as
follows:

Bilbao P 560,000

Bertol 400,000

Borja 240,000

The partnership agreement provides that partners shall receive:

1. Annual allowance of 6% of their average capital balances.

2. Salary allowances as follows: Bilbao - none; Bertol - P 96,000; Borja - P 80,000.

3. Bertol, who manages the business, is to recieve a bonus of 25% profit in excess of P 144,000 after partner’s interest and
salary allowances.

4. Residual profit will be divided in the ratioof 5:3:2.

Instructions. Prepare separate schedule showing how profit or loss will be divided among the three partners under each of the
following independent cases. The amount given in each case is the profit or loss for the year that is available for distribution to
partners.

1. P 50,000 loss.

2. P 120,000 profit.

3. P 500,000 profit.

Problem 13.

Basa, Benito, Beltran and Bagnes own a publishing company which they operate as a partnership. The partnership agreement
includes the following:

 Basa receives a salary of P 400,000 and a bonus of 3% of income after all bonuses.

 Benito receives a salary of P 200,000 and a bonus of 2% of income after all bonuses.

 All partners are to receive a 10% interest on their average capital balances. The average capital balances are as follows:
Basa - P 1,000,000; Benito - P 900,000; Beltran - P 400,000; Bagnes - P 940,000.

 Any remaining profits are to be divided equally among the partners.

Instructions:

1. Determine how a profit of P 2,100,000 would be allocated among the partners.

2. Determine how a loss of P 800,000 would be allocated among the partners.

3. Determine how a profit of P 800,000 would be allocated among the partners assuming the following priority system: income
should be allocated first giving priority to interest on invested capital, then bonusesm then salary, and then according to the profit
and loss percentages.

Problem 14.

The condensed income statement of Balte and Bala as December 31, 2014 follows:

Sales P 4,800,000

Cost of Sales 2,100,000

Gross Profit P 2,700,000

Operating Expenses 1,000,000

Profit Before Tax P 1,700,000

Income Tax (1,700,000 x 30%) 510,000

Profit P 1,190,000

The profit and loss agreement specifies that:

1. Interest of 8% is allowed on capital balances. Capital balances are P 500,000 and P 300,000, respectively, while withdrawals
debited to drawing accounts during the year are P 60,000 and P 100,000, respectively.
2. Salary allowances to Balte and Bala are P 120,000 and P 80,000, respectively.

3. A bonus is give to Balta equal to 20% of profit without regard to interest and salary.

4. Remaining profits and losses are to be divided in the ratio of capital balances.

Instructions:

1. Prepare a schedule showing the distribution of profit to the partners

2. Prepare the journal entries to required to distribute profit and to close the books of the partnership.

3. Prepare a statement of changes in partners’ equity.

Problem 15.

Brenda and Brosas entered into a partnership on may 1, 2014, investing P 625,000 and P 375,000, respectively. It was agreed that
Brenda, the managing partner, is to receive a salary of P 150,000 per year and 10% of profit after adjustment for the salary, any
remaining profit is to be divided in the ratio of original capital. On December 31, 2014, account balances are as follows:

Debit Credit

Accounts Payable P 300,000

Accounts Receivable P 335,000

Additional Brenda, Capital 625,000 information as of

December 31, 2014: Brenda, Drawing 100,000
1. Inventories: Brosas, Capital 375,000 merchandise, P 305,000,
supplies, P 12,500.
Brosas, Drawing 150,000
2. Prepaid taxes and insurance, P 5,000.
Cash 710,000
3. Accrued expenses, P 17,500.
Furnitures and Fixtures 225,000
4. Depreciation on furniture and fixtures, 20%
per year. Operating Expenses 300,000

Purchases 980,000

Instructions: Sales 1,525,000

Sales Returns and Allowances 25,000

1. Determine the profit or loss of the partnership. Income tax rate is 30%.

2. Prepare a schedule showing the distribution of partnership profit or loss.

3. Determine the ending capital balances of the partners.

Problem 16.

The account balances in the books of the Wanna Be on Top Partnership at the end of the first year of operations on December 31,
2014 are as follows:

Accounts Payable P 756,000 Notes Payable 360,000

 Accounts Receivable 186,000 Notes Receivable 120,000

Bathan, Capital 600,000 Purchases 4,920,000

Bathan, Drawing 144,000 Purchases Discount 138,000

Buenas Capital 489,000 Purchases Returns and Allowances 99,000

Buenas, Drawing 54,000 Sales 5,100,000

Cash 582,750 Sales Salaries 480,000

General Expenses - Other 756,000 Store Furniture 222,000

Interest Expense 26,250 Store Supplies 36,000

Interest Income 21,000 Taxes 36,000

As the person in charge of the preparation of the financial statements, you gathered the following data that require adjustments as
of December 31, 2014 and the information relating to division of partnership profit or loss:

1. Inventories: merchandise, P 1,406,000; supplies, P 16,500.

2. Depreciation of store furniture, 10% per year.Additions to store furniture were made on March 1 costing P 54,000.

3. Accrued advertising, P 9,500.

4. Prepaid taxes, P 10,000.

5. Accrued Taxes, P 10,500.

6. Accrued interest on notes payable, P 3,750.

7. Accrued interest on notes receivable, P 6,000.

8. Uncollectible accounts receivable, P 9,300.

9. Income taxes, 30%.

10. Bathan and Buenas agree to divide earnings as follows:

a. Interest of 10% on beginning capital balances.

b. Salaries to the managing partner Bathan of P 100,000.

c. Remaining profit or loss to be divided equally.

Instructions:

1. Prepare the journal entries necessary for the adjustments.

2. Prepare a schedule of how the net income or loss will be distributed among the partners.

Problem 17.

Bacani, Badeo and Barte formed a partnership on January 1, 2012, investing P 1,000,000, P 500,000 and P 400,000, respectively.
The partners agree to the following distribution of profits:
 1. Annual salaries are to be allocated to partners as follows:

Bacani P 96,000

Badeo 120,000

Barte 120,000

2. Interest is to be allowed on partners’ capital as of the beginning of each year at the rate of 6%.

3. Bacani, the managing partner, is to be allowed a bonus of 20% of the profit after treating as expenses the partners’
salaries, interest and bonus.

4. Profits and losses after partners’ salaries, interest and bonus are to be divided equally.

The partnership fiscal year is the calendar year. Activities of the partnership for 2012, 2013, and 2014 are summarized below:

2012 2013 2014

Profit or loss before interest, salaries and bonus (P 42,000) P 300,192 P 470,000

Cash withdrawals:

Bacani P 72,000 P 139,600 P 163,200

Badeo 86,800 163,200 195,200

Barte 96,000 177,200 169,600

Instruction: prepare a statement of changes in partners’ equity covering the three-year period ending December 31, 2014.
MULTIPLE CHOICE.

1. Banayo and his very close friend Buendia formed a partnership on January 1, 2014 with Banayo contributing P 160,000 cash
and Buendia contributing equipment with a book value of P 64,000 and a fair value of P 48,000, and inventory items with a book
value of P 24,000 and a fair value of P 32,000. During 2014, Buendia made additional investment of P 16,000 on April 1, and P
16,000 on June 1. On Septmber 1, he withdrew P 40,000. Banayo had no additional investment nor withdrawals during the year.
The average capital balance of Buendia at the end of the fiscal year 2014 is.

a. P 72,000 b. P 80,000 c. P 88,000 d. P 96,000

2. Bañas and Belda are parters who share profits equally and losses in a 2:1 ratio. If they have beginning capital balances of P
120,000 and P 118,000, made no additional investment nor withdrawals, and suffered an unprofitable year with loss of P 48,000m
their capital balances will be:

Bañas Belda

a. P 40,000 P 80,000

b. P 88,000 P 102,000

c. P 120,000 P 118,000

d. P 152,000 P 134,000

3. Bernardo and Belo formed a partnership in the year 2014. The partnership agreement provides for annual salary allowances
of P 110,000 for Bernardo and P 90,000 for Belo. The partners share profits equally and losses in a 60:40 ratio. The partnership
had a profit of P 180,000 for the year 2014 before any allowance to partners. What amount should be credited to each partner’s
capital account as a result of the distribution of the partnership profit?

Bernardo Belo

a. P 98,000 P 82,000

b. P 100,000 P 80,000

c. P 96,000 P 84,000

d. P 90,000 P 90,000

4. Bunag, Belen and Bustos are partners in an accounting firm. Their capital account balances at year-end were P 180,000, P
220,000, and P 100,000, respectively. They share profits and losses on a 4:4:2 ratio, after considering the following terms:

 Bustos is to receive a bonus of 10% profit after bonus.

 Interest of 10% shall be paid on that portion of a partner’s capital in excess of P 200,000.

 Salaries of P 20,000 and P 24,000 shall be paid to partners Bunag and Bustos, respectively.

Assuming a profit of P 220,000 for the year, the total profit share of Bustos is

a. P 38,800 b. P 50,800 c. P 54,800 d. P 74,800

5. Banta, Berba, and Borja formed a partnership on Januray 1, 2014. they had the following initial investments: Banta - P
200,000; Berba - P 300,000; Borja - P 450,000. the partnership agreement states that profits and losses are to beshared equally by
the partners after consideration is made for the following:

 Salary allowance of P 120,000 fir Banta, P 96,000 for Berba, and P 72,000 for Borja.

 Average partners’ capital balances during the year shall be allowed 10% interest
 Additional information:

 On June 30, 2014, Borja invested an additional P 120,000.

 Borja withdrew P 140,000 from the partnership on September 30, 2014.

 Share on the remaining partnership profit was P 10,000 for each partner.

How much is the total interest on average capital balances of the partners?

a. P 95,000 b. P 97,500 c. P 107,500 d. P 115,250

6. Using the information in #5, partnership profit at December 31, 2014 before salaries, interest and partners’ share on the
remainder is

a. P 395,500 b. P 399,500 c. P 415,500 d. P 423,500

7. Using the information in #5, the total partnership capital on December 31, 2014 is

a. P 950,000 b. P 970,000 c. P 1,345,500 d. P 1,365,500

8. On January 1, 2014, Besa, Basco, Buan, and Baduel formed the B4 TRADING, a partnership with capital contributions as
follows: Besa - P 150,000; Basco - P 75,000; Buan - P 75,000; and Baduel - P 60,000. The partnership agreement stipulates that
each partner shall receive a 5% interest on capital contributed and that Besa and Basco shall receive salaries (chargeable as
expenses of the business) of P 15,000 and P 9,000, respectively. The agreement further provides that Buan shall receive a
minimum of P 7,500 per annum and Baduel a minimum of P 18,000, which is inclusive of amounts representing interest and their
respective share in partnership profits. The balance of the profits shall be distributed among the partners in the ratio of 3:3:2:2.

What amount must be earned by the partnership in the fiscal year 2014, before any charge for interest and partners’ salaries,
in order that Besa may receive an aggregate of P 37,500 including interest, salary and share of profits?

a. P 92,000 b. P 97,000 c. P 50,000 d. P 90,000

9. Using the information in #8, the total profit share of Buan is

a. P 7,500 b. P 13,750 c. P 19,400 d. P 37,500

10. Using the information in #8, the total share of Baduel is

a. P 13,000 b. P 13,500 c. P 18,000 d. P 19,400

11. The partnership agreement between Banaria and Bertol stipulates that Banaria is to receive a 20% bonus on profits before
bonus with the residual profit and loss to be apportioned in the ratio of 2:3 respectively. Which partner has greater advantage
when the partnership has a profit and when it incurs a loss?

Profit Loss

a. Bertol Banaria

b. Banaria Bertol

c. Banaria Banaria

d. Bertol Bertol
12. Bulan, Bustos, and Bucao formed a partnership on January 1, 2014 and contributed P 150,00, P 200,000, and P 250,000,
resectively. The Articles of Partnership provide that the operating income be shared among the partners as follows:

 Salaries: Bulan - P 24,000, Bustos - P 18,000.

 Interest: 12% on average capital during 2014 of the three partners.

 Remainder: To be divided in the ratio of 2:4:4, respectively.

Additional information:

 Operating income for the year ended December 31, 2014 is P 180,000.

 Bulan contributed additional capital of P 30,000 on July 1, and made drawing of P 10,000 on October 1.

 Bustos contributed capital of P 20,000 on August 1 and made withdrawal on P 10,000 on October 1.

 Bucao made withdrawal of P 30,000 on November 1.

The division of the P 180,000 operating income to each partner, respectively is

a. P 53,760, P 62,520, P 59,720 c. P 53,980, P 63,660, P 62,360

b. P 35,200, P 70,400, P 70,400 d. P 53,180, P 62,060, P 60,760

13. Using the information in #12, the partners’ capital balances on December 31, 2014 of each of the partners are

a. P 223,980, P 273,660, P 282,360 c. P 189,860, P 239,360, P 269,360

b. P 179,760, P 229,520, P 239,520 d. P 223,180, P 272,060, P 280,760

14. Briones, Belen and Burgos are partners with average capital balances during 2014 of P 945,000, P 477,300 and P 324,700,
respectively. The partners receive 10% interest on their average capital balances, salaries of P 244,650 to Briones and P 164,250
to Burgos, any residual profit or loss is divided equally.

In 2014, the partnership had a net loss of P 251, 248 before the interest and salaries to partners.

What is the change in the capital balances of Briones and Burgos, respectively?

a. (P 81,688), (P 62,474) c. P 58,952, P 35,072

b. P 56,716, P 64,916 d. P 60,534, (P 80,896)

15. If the partners have not drawn up any agreement, then they must share profits and losses,

a. Equally c. By any appropriate ratio

b. By any means that they will save taxes d. According to their capital contribution

16. Among the various options available for determining the partners’ share of profit are the following except,

a. Capital contributions and service to the partnership c. Capital contributions

b. Loans to the partnership d. Stated fraction or ratio

17. Partners Baron and Basilio share income in a 2:1 ratio, respectively. Each partner receives an annual salary allowance of P
72,000. Iif the salaries are recorded in the accounts of the partnership as an expense rather than treated as an allocation of profit,
the total amount allocated to each partner for salaries and profits would be

a. Less for both Barona and Basilio c. More for Barona but less for Basilio

b. Unchanged for Barona and Basilio d. More for Basilio but less for Barona

18. Partners Bagobo and Bicomo share profit and loss equally after each has been credited with annual salary allowances of P
90,000 and P 72,000, respectively. Under this agreement, Bagobo will benefit by P 18,000 more than Bicomo in which of the
following circumstances?

a. Only if the partnership has profit of P 162,000 or more for the year.

b. Only if the partnership does not incur a loss for the year.

c. In all profit or loss situation.

d. Only if the partnership has profit of at least P 18,000 for the year.

19. The BB Tours Partnership earned P 500,000 this year. The partners have equal capital balances, and share profits and losses
1:3. the partners will show share in the partnership profit of

a. P 250,000 each c. P 125,000 and P 375,000, respectively

b. P 250,000 and P 750,000, respectively d. P 500,000 each

20. Beltran and Barba are partners who share profits equally and losses in 2:1 ratio. Beltran and Barba have beginning capital
balances of P 400,000 and P 500,000, respectively, and made no withdrawals during a period of two years. After profitable
operations in the first year with a profit of P 400,000 and an unprofitable operations on the second year with a loss of P 240,000,
the capital balances of Beltran and Barba will be

a. P 480,000, P 580,000 c. P 440,000, P 620,000

b. P 390,000, P 570,000 d. P 670,000, P 770,000

21. Bamba and Balbina share profits and losses in the ratio of 1:2. Bamba receives a monthly salary of P 150,000. If Bamba’s
capital balance is P 2,500,000 at the beginning of the year and P 2,000,000 at the end of the year, and annual partnership profit
after salaries is P 1,200,000, then Bamba withdrew

a. P 500,000 b. P 1,300,000 c. P 2,700,000 d. P 3,200,000

22. The BBB Company is a partnership of three musicians who play at weddings and office parties. The partnership’s profits and
losses are allocated in proportion to the partners’ capital contributions. If the partners Bamboo, Banda, and Banjo have capital
contributions of P 300,000, P 300,000 and P 500,000, respectively. What is each partners’ share in the profit of P 1,100,000?

a. P 300,000, P 200,000, P 600,000 c. P 300,000, P 500,000, P 1,100,000

b. P 300,000, P 300,000, P 500,000 d. P 366,667, P 366,667, P 366,667

23. Banzon and Borja are partners in B and B enterprises. Partnership profits and losses are allocated as follows: salaries of P
160,000 and P 200,000 to Banzon and Borja, respectively; 10% interest in their beginning capital balances, any remaining profit
or loss is divided equally. At the beginning of the year, their capital balances are P 360,000 and P 600,000. how will the
partnership profit of P 600,000 be allocated to the two partners?

a. P 192,000, P 408,000 c. P 300,000, P 300,000

b. P 268,000, P 332,000 d. P 280,000, P 320,000

24. Bautista, a partner in the Christian Partnership, has a 20% participation in the partnership profit and loss. Bautista’s capital
account had a net decrease of P 240,000 during the calendar year 2014. During 2014, Bautista withdrew P 520,000 (charged
against his capital account) and contributed property valued at P 100,000 to the partnership. What was the profit of the
partnership?

a. P 600,000 b. P 900,000 c. P 1,400,000 d. P 2,200,000

25. The partnership agreement of Bustos and Balen provides that interest at 12% per year is to be credited to each partner on the
basis of average capital balances. A summary of Balen’s capital account for the year ended December 31, 2014 is as follows:

What amount if interest should be credited to Balen’s capital account for 2014?

a. P 91,500 b. P 92,500 c. P 99,000 d. P 110,700

26. Basilio and Bituin formed a partnership in the year 2014. the partnership agreement provides for annual salary allowances of
P 220,000 for Basilio and P 180,000 for Bituin. The partners share profits equally and losses in a 60:40 ratio. The partnership had
a profit of P 360,000 for the year 2014 before any allowance to partners. What amount should be credited to each partner’s capital
account as a result of the distribution of the partnership profit?

Basilio Bituin

a. P 180,000 P 180,000

b. P 192,000 P 192,000

c. P 196,000 P 164,000

d. P 200,000 P 160,000

27. Bucao, Basco, and Blanco share profits and losses in the ratio of 2:3:5, respectively. Their partnership realized a profit of P
900,000 during the year. Bucao, with a beginning capital
balanceof P 1,000,000, Balance, January 1 P 840,000 withdrew P 200,000 during the year.
Bucao’s ending capital balance is
Additional investment, July 1 240,000
a. P 980,000 c. P 1,160,000
Wuthdrawal, August 1 90,000
b. P 1,000,000 d. P 1,380,000
Balance, December 31 990,000

28. The B2 partnership was formed on January 3, 2014. under the partnership agreement, each partner has an equal initial capital
balance accounted for under the bonus method. Partnership profit or loss is allocated 60% to Brecia and 40% to Buan. To form the
partnership, Brecia originally contributed assets costing P 300,000 with a fair value of P 600,000 on January 3, 2014 while Buan
contributed P 200,000 in cash. Withdrawals by the partners during the fiscal 2014 totalled P 30,000 by Brecia and P 90,000 by
Buan. The partnershup profit for fiscal year 2014 was P 450,000. Buan’s initial capital balance in the partnership is

a. P 200,000 b. P 250,000 c. P 400,000 d. P 600,000

29. Using the information in #28, what is the ending balance of Brecia at December 31, 2014?

a. P 550,000 b. P 640,000 c. P 840,000 d. P 870,000

TRUE OR FALSE.

1. An adequate accounting systems and an accurate measurement if income are not needed by a partnership because the profit is
divided among two or more partners.

2. If the partners did not agree as to how profits are to be divided, then such should be divided among the partners equally.

3. The income statement of a partnership differs from that of a single proprietorship in only one aspect: a final section is added
to show the division of the profit between or among partners.

4. Any salaries authorized for partners are regarded as a preliminary step in the division of profits, not as an expense of the
business.

5. The statement of changes in partners’ equity takes the place of the capital statement in a sole proprietorship.

6. All partnerships, just like corporations, are subject to income tax.

7. Bonus is allowed to partners only if there is a partnership profit, since bonus is based on profit.

8. Unless otherwise agreed, allowance for salaries and interest are allowed to partners whether there is a profit or a loss,
whether the profit is sufficient or not.

9. All partners, whether capitalsit or industrial, are to share on whatever partnership profits or losses.

10. The drawing account of a partner may have a debit or credit balance.

11. The profit of the partnership is transferred to the drawing accounts of the partners if the intention is to keep the capital
account intact for investments and permanent withdrawals of capital.

12. A credit balance in the Income Summary account represents profit after closing into it all the operating (nominal) accounts.

13. If the partnership agreement specifies a method for sharing profits, but not losses, then losses are shared in the same
proportion as profits.

14. Allowance for salaries and interest in a partnership agreement are methods of allocating profits and losses to the partners.

15. The percentage interest in a partnership is always the same as the profit-sharing ratio.

16. Profits and losses, in general, shall be divided in accordance with the agreement among the partners.
17. Partners may intend for salary and interest allowances to be deducted in determining the base for computing bonus. In such a
case, no bonus is allowed if there is insufficient profit after distribution of salaries and interests.

18. Salaries, interests and bonuses allowed to partners as distribution of partnership profits are treated as partnership expenses.

19. The partnership books may show an incorrect profit because of errors and omissions that should first be corrected before the
profit distribution to the partners.

20. In the absence of an agreement, the capitalist-industrial partner in his character as industrial partner shall have no share in the
losses, but in his character as a capitalist partner will share in proportion to his capital contribution.