44

Chapter
PROBLEMS

PROBLEM 1: TRUE OR FALSE

1. According to the law, if no profit orloss sharing ratio has ber
been
agreed upon, the partners shal share equally.
2 Mr. A and Ms. B formed a partnership. Mr. A contributed Pi
IM
cash, while Ms. B will contribute her services. Mr. A is
capitalist partner, while Ms. B is an industrial partner.

Fact pattern:
You and I are partners. We share in profits equally. Because I am
the managing partner, I am entitled to a 20% bonus computed on
profit before deducting the bonus

3. If our partnership earns profit of PlM (before deducting

bonus), your share would be P500,000.
4. If our partnership incurs loss of PIM, your share would be
negative P400,000.

5. Normally, partners are entitled to salaries for the services they

have rendered to the partnership business only if the business
earns profit.

Fact pattern
He and She are partners, with 60% and 40% interests in
partnership profit, respectively. He is entitled to P2M annual
salary.
6. If the partnershipP12M profit before
earns
deducting Hes
salary, She's share would be P4M.
7. If the
partnership incurs P8M loss before deducting He>
salary, She's share would be negative P4M.

Fact pattern:
A and B
formed a
partnership. The partnership agreen
ment

stipulates the following:

Partnership Operations
*****

45
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Annual salary allowances of P50 for A and P30 for B.

.Any remaining amount of profit or loss shall be
equally.
divided

8. During the period the partnership earned profit of P100 betore

salary allowances. A's share in the partnership profit is P10.
9. During the period the partnership incurred loss of P100 betore
salary allowances. A's share in the partnership loss is -P40.

10. Mr. C, the managing partner in ABC Co. is entitled to a 20%

bonus on profit after partners' salaries and bonus. ABC Co.
reported profit of P360 after deducting the partners' salaries
but before deducting Mr. C's bonus. Mr. C's bonus is P80.

PROBLEM 2: MULTIPLE CHOICE - THEORY

1. How should the partners in a business partnership sharein
the profits or losses of the partnership?
a. Equally.
b. At whatever basis of allocation that the dominating
partner deems reasonable.
C. In accordance with the partnership agreement.
d. Based on "rock, paper, scissors" winner takes all.

2. According to the Philippine Civil Code, if only the share of

each partner in the profits has been agreed upon, the share of
each in the losses shall be
a. in equal amounts.
b. in equal amounts, but excluding the industrial partner.
contributions.
C.in proportion to the partners'
d. the same as the sharing in profits.

absence of a
, According to the Philippine Civil Code, in the
or losses, partnership
stipulation on the sharing of profits
profits and losses shall be
shared by the partners
a. equally.
 46
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Chapter
b. in accordance with the partnership agreement.
C. in proportion to what the partners may have contribu
d. in proportion to what the partners may have contribut.
contributed
but the industrial partner shall not be liable for the los uted
sses.
4. Which of the following is not a component of the formn
used to distribute partnership profits to the partners? mula
a. Salary allocation to those partners working.
b. After all other allocation, the remainder divided accordino
to the profit and loss sharing ratio. ing
Interest on the average capital investments.
C.

d. Interest on notes to partners.

(AICPA -Adapted)

5. When allocating a
partnership loss to the partners which of
the following items is provided first?
a. salaries
b.bonuses to partners
C. interest on the capital contribution of an industrial
partner
d. all of these

PROBLEM 3: EXERCISES
1. Partners A and B share in
profits and losses equally after
salaries of P100,000 for A and
P60,000 for B. The busines
earned profit of P200,000 before
deduction for the salaries.
Requiremnents:
a.
Compute for the partners' respective shares in the protit.
b. Provide the
journal entries (the salaries are withdraw
periodically).
2. A and B's
partnership agreement provides for annual sa
allowances of P160,000 for A and P80.000 for B. Profitsa
shared equally, while losses on a rship
60:40 ratio. The partners
earned profit of P200,000.
 Partnership Operations 47

Requirement: Compute for the respective shares of the partners in

the profit.

3.A and B's partnership

agreement states the following:
Annual salaries of P96,000 for A and
P60,000 for B.
10% bonus to A, based on profit after salaries and bonus.
.P/L ratio of 60:40.

The partnership eamed profit of P200,000 before salaries and

bonus

Requirememt: Compute for the respective shares of the partners in

the profit.

4. A and B's partnership agreement provides for an annual

salary allowance of P100,000 for A and 10% interest on the
weighted average capital balance of B. The remainder is
shared on a 60:40 ratio, respectively. During the period, the
B's capital account had
partnership earned profit of P200,000.
a beginning8 balance of P120,000. B made additional
investments of P40,000 on April 1, P80,000 on Sept. 30, and

P20,000 on Dec. 31, and made drawings of P60,000 on July 31.

of the partners in
Requirement: Compute for the respective shares
the profit.

5. A&B Co. started operations on April 1, 20x1. Mr. A, a partner

interest on the weighted
in A&B Co., is entitled to 12%
account. Mr. A's ledger shows
average balance of his capital
the following:
A, Capital
ansndanatreettedttga sasa*agssasadUnea***a*Aaasareetengeeene*** ******************

P****"***"***707"**"*****"**********

Debit Credit Balance

Date Ref.
e s d s s t a d d e e d d o u u s s g i s g e e d e g e s 4 4 e e t d d v i d e s * 1 * 1 4 4 4 9 5 4 4 e * * * * * e e n a p b e d * * * * * * * * *
stetsantenauun saesedasgand,

001 100,000.00 100,000.00

April 1, 20x1 ***sS**s**sS**9s*******************************

wessdvaamsimasusssssaysuwassss********
098 21,000.00 79,000.00
June 30, 20x1
146 8,000.00 87,000.00)
September 30, 20x1
ww.d ** vipsaspaesss*netpene*nerusepatgan**********"

1 4,000.00 83,000.00
December 1, 20x1 " *""****""****
 48
**********
Chapter

interest on Mr. A's weight

Requirement: Compute for the hted
average capital balance.

6. The partnership agreement of A andB states the tollowing:

Monthly salary of P10,000 for A.

20% bonus to A, before deductions for salary, interest, andd
bonus.
10% interest on the weighted average capital of B.
Balance is shared equally.

B's weighted average capital balance is P200,000. The partnershin

reported profit of P60,000 for the year, net of salaries, bonus and
interest.

Requirement: Compute for A's share in the profit.

7. A and B's partnership started operations on July 1, 20x1. The

partnership agreement requires A and B to maintain average
capital balances of P200,000 and P300,000, respectively. A 10%
annual interest is to be computed on any excess or deficiency.
Any remaining amount of profit or loss is to be shared on a
60:40 ratio. The partnership incurred loss of
P120,000 in 20xl.
The average capital balances in
20x1
were P240,000 for A and
P220,000 for B.

Requirement: Compute for the respective shares of the partners

the loss.

8. A and B formed a
partnership and began operations on Mar
1, 20x1. A investedP200,000 cash, while B invested equipmen
with a book value of P600,000 and
fair value of P360,000. On
a
August 31, 20x1, invested additional cash of
A
partnership agreement stipulates the following:P40,000. 1n
Monthly salary allowances of P4,000 and P20,000 to A and D
respectively, recognized as expenses.
Partnersh1p Operations
49

20% bonus on
profit before salaries and interest but after
bonus to B.
.12% annual interest on the beginning capital of A.
.Balance equally.
The monthly salaries are withdrawn by the partners at each
month-end. The partnership earned profit of P420,000 during the
period before deductions for bonus and interest.

Requirement: Compute for the ending balances of each of the

partners' capital accounts.

PROBLEM 4: MULTIPLE CHOICE COMPUTATIONAL

1. A and B formed a partnership. The
partnership agreement
stipulates the following:
Annual salary allowances of P80,000 for A and P40,000 for B.
The partners share profits equally and losses on a 60:40 ratio.

During the period, the partnership earned profit of P100,000. How

much was the share of A?
a. 72,000 c. 52,000
b. 68,000 d. 32,000

2. A, B and C are partners, sharing in partnership profits in the

ratio of 2:3:4. A, the managing partner, is entitled to an annual
salary of P80,000 and a 10% bonus on profit after deducting
the salary but before deducting the bonus. The partnershipP
earned profit of P560,000. How much is the share of A?
a. 214,400 c. 224,000
b. 196,000 d. 189,667

The partnership agreement of A, B and C stipulates the

following: bonus of 10% of

A , the managing partner, shall
receive a
profit.
 50
Chapter
average capitaj
Each partner shall receive a 6% interest on average cana

investments.
A n y remaining profit or loss shall be shared equally.

The average capital investments of the partners during the Ves.

were P80,000 for A, P50,000 for B, and P30,000 for C. Th
year
partnership earned profit of P100,000 during the period. Ho
much was A's share?
a. 23,800 c. 29,800
b. 28,600 d. 41,600
(AICPA adapted)

4. A and B's partnership agreement stipulates the following:

Annual salary allowance of P100,000 for A.
Bonus to A of 10% of the profit after partner's salaries and
bonus.
The partners share in profits and losses on a 60:40 ratio.

The partnership incurred loss of P40,000 before deduction for

salaries. How much is the change in A's capital account?
a. 56,000 decrease c. 16,000 increase
b. 15,000 decrease d. 9,000 increase

5. In its first year of operations, A and B's partnership business

earned profit of P2,500,000. It was agreed that A is to have an
annual salary allowance of P100,000 and a 20% bonus based
on profit after deducting the salary and the bonus. However,
there has been no stipulation on how the remaining profit is to
be shared between A and B. A contributed P300,000, while B
contributed P500,000. How much is the share of B?
a. 1,250,000 c. 1,350,000
b. 1,060,000 d. 1,080,000

6. Billy and Sheehan are partners in Bass Co. Their partnersh

agreement states that Billy is entitled to an annual salary
P100,000 and a bonus of 10% of profit after salary but betoe
 Partnership Operations
51

bonus. The remainder is shared in the ratio of 7:2.

Sheehans
share in partnership proit for the was vearP296,000.
How
much was the
partnership profit before Billy's salary and
bonus?
a. 1,580,000
c.1,751,348
b. 1,672,342 d. 1,420,000

7. A&B Partnership earms profit of P240,000 in 20x1. The

movements in the capital accounts of the partners are shown
below:
A, capital B, capital1
Dr. Cr. Dr. Cr.

T
Jan. 1 120,000 80,000
May 1 20,000 10,000
July 1 20,000
Aug. 1 10,000
Oct. 1 10,000 5,000

How much is the share of A if profits are to be divided based on

average capital?
a. 108,333 c. 103,457
b. 121,500 d. 136,543
(RPCPA)

8. Partner A first contributed P50,000 of capital into an existing

partnership on March 1, 20x1. On June 1 20x1, Partner A
contributed another P20,000. On September 1, 20x1, Partner A
withdrew P15,000 from the partnership. Withdrawal in excess
of P10,000 is charged to the partner's capital account. The
annual interest rate applicable to capital contributions is 12%.
How much is the interest on the weighted average capital

balance of Partner A in 20x1?

a. 6,200 c. 7,567
b. 6,667 d. 8,993
(AICPA)
52 Chapter
9. A and B share in partnership profits and losses on a 40

A's capital account

had a net increase
ratio. During the year,
P50,000. Partner A made
contributions and
of Pi0,000 and capital
capit
the year. How much was the
withdrawals of P60,000 during
for the year?
share of B in the partnership profit
C. 200,000
a. 100,000
d. 180,000
b. 150,000

A and B stipulates the

10. The Articles of Partnership of partners
following:
Annual salary of P60,000 each.
Bonus to Partner A of 20% of the profit after partners
salaries. The bonus and salaries are treated as expenses.

Balance to be divided equally.

The partnership earned profit of P480,000 before partners' salaries

and bonus. How much is the total share of A, including salary and
bonus?
a. 270,000 c. 230,000
b. 250,000 d. 210,000
(ACPA)

PROBLEM 5: CLASSROOM ACTIVITY

INSTRUCTIONS:
1. Find a study partner
2. Imagine that you and your study partner are business
partners.
3. Fill-out the missing information
below in accordance witn
your agreement.
4 Answer the succeeding
requirements.
5. After answering the
requirements, have your computatio
audited by your kind classmates.

Your Articles of
Partnership stipulates the following:
 Partnership Operations
53

Partner shall be entitled to an arnnual

annual salary
salary of

Partner 2 shall be entitled to an annual salary of

Partner shall be entitled to a

_% bonus on profit after
deducting both salaries and bonus.
Each partner shall receive % interest
investments.
on average capital

Any remaining profit or loss is divided on a ratio.

The movements in your capital accounts during the year are as

follows:
Partner 1
Jan. 1
Additional Withdrawal
investmernton. on
Dec. 31

Partner 1
Jan. 1
Additional Withdrawal
on
investment on.
Dec. 31

Case #1:
earned profit of
During the year, your partnership

shares in the profit.

Cquirement: Compute for your respective
Pr a r e working papers /solutions like pro.
a
p

Case #2: incurred loss of

of
partnership
During
the
the year,
year, your
 54 Chapter2
suwitnwenesanoondaaias.

shares in the loo.

Requiremnent: Compute for your respective loss.
with a soun
solutions like a person und
Prepare working papers /
mind, not like a crazy animal.

PROBLEM 6: FOR CLASSROOM DISCUSSION

Division of profits and losses

1. A, Band C's partnership agreement stipulates the following:
Annual salaries of P12,000 to A and P8,000 to C.
10% bonus to A, based on profit after salaries but before
deducting the bonus.
10% interest on the following capital contributions: A,
P100,000; B, P60,000; and C, P120,000.
P/L ratio of 40:30:30.

Case 1: Sufficient profit

The partnership earns profit of P100,000. Compute for the
partners respective shares.

Case 2: Insufficient profit

The partnership earns profit of P10,000. Compute for the partners'
respective shares.

Case 3: Loss
The partnership incurs loss of P20,000.
Compute for the partners
respective shares.

Interest on Weighted average capital

2 A and B's partnership agreement stipulates the following
Monthly salary of P4,000 to A.
20% bonus to A, based on profit after deductions tOr
salary and bonus, but before deduction for interest.
12% interest on B's weighted B
average capital
period,
balance. B
initially contributed P30,000. During the period,
 Partnership Operations 55

contributed additional P10,000 on July 1 and P6,000 on

Nov. 30, and withdrew
P4,000 on Oct. 1.
.Balance is shared equally.
Case 1: Full year
The partnership earned profit of P90,000, before salaries, bonus
and interest on capital, for the year ended Dec. 31, 20x1.

Requirement: Provide the journal entry to close the income

summary account to the partners' respective capital accounts.

Case 2: Partial year

The partnership earned profit of P90,000, before salaries, bonus
and interest on capital, for the eight months ended Dec. 31, 20xl.

Requirement: Provide the journal entry to close the income

summary to the partners' respective capital accounts.

Reconstruction of information
3. A and B's partnership agreement stipulates the following:
Annual salary of P20,000 to A.
10% bonus to A, based on profit after salaries and bonus.
Balance is shared on a 60:40 ratio.

for the year is

Requirement: If B's share in the partnership profit
before salary and
P32,000, how much is the partnership profit
bonus?