PA-02: PartnershipOperatioms

PA-02: Partnership Operations

PROBLEM
sOLVINGG 300,000 x 6% x 11/12 16,500
I
-

260,000 x 6% x 11/12 300

pply the answer 50,050
Remainder
9 PA-02 Problem 1: 1:2:3 (if positive)
January 31, 20xx. 1:1:1 (if negative)
Josh
was
formed
on
Josh P
(19,000) (19,000) (19,000)5z,000
Share in Net income (loss)
The partnership
of Grace,
Kim, and
as
follows:
Grace
- P
350,000;

agreement, profe 66.250 80,000 50,300 196.550

were

original
investments

According
to the
partnership
Squeeze figure
ne P 300,000.
as
follows:

260,000; Kim Kim; and p

-

the partners for

divided among P 90,000 2. Answer: P 92,817
wili be for Grace;
or loss
of P 72,000
Annual
salaries

for each partner

Grace Kim Josh TOTAL
60,000 for Josh.
capital
balance Salaries
the original 72,000 x 11/12 66,000
Interest at 6% on folows:
divided as respectively if tho 90,000 x 11/12
Remainder is to be and Josh, 500
Grace, Kim, 60,000 x 11/12
1:2:3 to 55,000 203,500
remainder is positive. Interest on invested capital
is negative
Equaly if the
remainder
350,000 x 6% x 11/12 19,250
share for the year 300,000 x 6% x 11/12 16,500
as her profit 260,000 x 6% x 11/12
to receive P 80,000 must be generated 14,300 50,050
For Kim that
1.
much is the
net income Remainder
20xx,how 1:2:3 (if positive) 7,567 ,133 22.700 45,400
by the partnership?
share for the year
92,000 as his profit
receive P
1:1:1 (if negative)
2. For Josh to share of Gracee?
must be the profit Share in Net income (loss) 92.817 114.133 92,000 298,950
how much
20xx, her share in the net loss off
have P 13,000 as
3. For Grace to much is the net loss
that must be *Squeeze figure
how
the partnership,
for the year 20xx?
sustained by the partnership must have been the 3. Answer: P 41,200
much
4. With regardsto item no. 3, how balance as a result of Grace Kim Josh TOTAL
in Kim's capital
increase or decrease Salaries
of the partnership? (indicate
the share in the net loss 72,000 x 11/12 66,000
whether increase or decrease) 90,000 x 11/12 82,500
60,000 x 11/12 55,000 203,500
02 Problem 1: Interest on invested capital
Answers and Solutions Guide to PA -

350,000 x 6% x 11/12 19,250

Answer: P 196,550 300,000 x 6% x 11/12 16,500
Grace Josh TOTAL 260,000 x 6% x 11/12 14,300 50,050
Salaries Remainder
72,000x 11/12 66.000 1:2:3 (if positive)
90,000 x 1/12 82,500 1:1:1 (if negative)
60,000x 11/12
(98,250) (98,250) (98,250) 294750
55,000 203,500 Share in Net income (loss) (13.000) 750 (28,950) ( (41,200)
Interest on invested capital
350.000 x 6% x 11/12 19.,250 *Squeeze figure
52 53
 PA-02: Partnership Operations

PA-02: Partnership Operations

increase
4. Answer: P 750 6. How much is the net increase in
Ira's capital account
See item no. 3 during 20xx?
PA-02 Problem 2: 7. How much is the net increase in
Sam's capital account
business w during 20xx?
engaged
in a
merchandising

the
which
partne 8. What is the ending capital balance of Ira?
ra
and sam are
partners Transactions
arecting
ers 9. What is the ending capital balance of Sam?
operations
last two years.
began are astollows
in 20xx Sam, Capital CASE 2: Assuming the partners agreed to use simple average
capital accounts Ira, Capital
DR. CR. DR CR capital as the basis of their 6% interest...
175,000 1. How much is the bonus to Ira?
150,000
Beg. Bal 2. How much is Ira's share in net income for the year 20xx?
40,000
4/1 25,000 3. How much is Sam's share in the net income for the year
5/31 20xx?
7/31 25,000 50,000 How much is the net increase in Ira's capital account
8/1 during 20xx?
40,000
9/30 5. How much is the net increase in Sam's capital account
15,000 during 20xx?
10/1 10,000
11/30 10,000 6. What is the ending capital balance of Ira?
12/31 35,000 7. What is the ending capital balance of Sam?

On December 31, 20xx, after closing

entries, the income summary account
P 227,500. The partnership
is subect to 30% Answers and Solutions Guide to PA- 02 Problem2:
has a credit balance of
Sam foliows
income tax. Agreement between Ira and CASE 1
are as

Each partner is to be credited interest at 6% on aver age capital 1. Answer: P 172,500

Each partner is to be given salaties of P 100,000 to ira and P Number of months to Dec. 31 Peso-Month Approach
120,000 to Sam.
1 150000x 12/12 150,000 1/1 150,000x 3/12 37,500
Bonus to Ira at 25% of net income betore income tax but after 41 40,000 x9/12 30,000 4/1 190,000x4/12= 63,333
731 (25,000) x 5/12 (10,417) OR 7/131 165,000 x 2/12 27,500
deducting interests, her salary, and bonus. 180,000x 2/12
10/1 15.000x 3/12 3,750 10/1 30,000
Any remainder is to be divided in the ratio ot 3 o to Ira and sam, (10,000) x1/12 11/30 170,000x 1/12 14,167
respectively.
11/30 (833)
Ira's Average Capital Balance 172,500 172,500
CASE 1: Assuming the partners agreed to use weighted average 2. Answer: P 201,250
Peso-Month Approach
capital as the basis of their 6% interest... Number of months to Dec. 31
1/1 175.000 x 12/12 175,000 1/1 175.000 x 5/12 917
1. What is the average capital balance of Ira? 5/31 200,000 x 2/12 33,333
2. What is the average capital balance of Sam? 5/31 25,000x 7/12 14,583
50,000x 5/12 20.833 0OR 8/1 250.000 x2/12 41,667
How much is the bonus to Ira? 8/1
9/30 210,000x2/12 35,000
930 (40.000)x 3/12 (10,000)
How much is Ira's share in net income for the 834 11/30 220.000 x 1/12 =
18.333
How much is Sam's share in the net income year 20x 11/30 10,000x 1/12
0 12/31 185.000xO/12
20xx? for the yes 1231 35,000x O/12
55
54
 PA-02 Partnershin Oerations

Sam's Average Capital

Balance
201.250 2012 PA 02:
Partnership Operations
Ira's 20xx profit share
Net increase in capital 132 85
3 Answer: P 40,515
Ira
9am TOTAL 7. Answer: P 105,115
152385
capital May 31 additional investment
Interest on average 10.350 25,000
,425 August 1 additional investment
172 500 x 6% 12,075 50,000
201.250 x6 120,000 220,000 September 30 permanent withdrawal (40,000)
100.000
40,515 November 30 additional investrment 10,000
Saianes 40,515 December 31 permanent withdrawal (35,000)
Bonus
Remaining profits /3:6) (18,480) 36,960) (55,440) Sam's 20xx profit share
132,385 95,115 227,500 95,115
income Net increase in capital 105.115
Share in Net

Bous-6.25 (Pre -

tax net income

-

Interests
-Ira s salary. 8. Answer: P 302,385
1/1/20x capital balance 150,000
Bonus 75001 Tax rate)-22,425- 100,000- Net increase in capital during the year 152,385
-

Bonus
12/31/20x capital balance 302.385
Bonus 0.37 22,425- 100,000 -Bonus)
227.500 1
-

Bonus= 9. Answer: P 280,115

Bonus= 25 (227,500/0.77-22,425-10,000 - Bonus) 1/1/20xx capital balance 175,000
25 325,00-22425-100,000-Bonus) Net increase in capital during the year 105,115
Bonus=
5 202,575 - Bonus)
Bonus = 12/31/20a capital balance 280,115
Bonus 643.75- 0.25 Bonus
Bonus 0.25 Bonus=50,643.75 CASE 2
.25 BonuUs = 50,543.75
1. Answer: P 40,920
Beginning+ Ending
=-
2Bonus 50.643.75 Simple Average capital balance
25 Ira
150,000+ 170,000
Sam
175,000+ 185,000
Simple average
Bonus = 40,515 capital balance
160.000 180.000
4. Answer: P 132,385
See item no. 3 ra Sam TOTAL
Interest on average capital
5. Answer: P 160,000 x 6% 9,600
95,115 10,800 ,400
See item no. 3 180,000 x 6%
100,000 120,000 220,000
Salaries 40,920
6. Answer: P 152,385 Bonus 40,920
Remaining profits (3:6) (17,940) 35,880) (53,820)
April 1 additional investment 132,580 4920 227.500
July 31 perrmanent withdrawal 40,000 Share in Net income
Iras salary Bonus)
(25,000)
-

interests -

October 1 additional investment tax net income

-

*Bonus 0.25 (Pre

-

November 30 permanent withdrawal 15,000

(10,000) 57
56
 Operations

Partnership

02:
PA
O00-Bonus)
-

100000
400- PA-02: Partnership Operations
rate-20 Bonus)
5001-Tax 100,000 - 5
2 1 - 0 3 1 - 2 0 , 4 0 0 -

0 7 7 - 2 0 , 4 0 0 - 1 0 0
000-
,
Bonus) 12/31/20xx capital balance 302,580
5 100,000-Bonus)
7. Answer: P 279,920
Bonus 227.500 400-
.25 0 1/1/20xx capital balance
Bonus 325,000-20

175,000
0.25 BOMUS Net increase in capital
during
=
77us
(204,6- the year 104,920
B07US
=
U.23
0.25BOUs 12/31/20xx capital balance 279,920
Bonus =51,150- 150
=51,
Bonus- 0.25Bonus
25 Bonus
= 51,150
PA-02 Problem 3
150 Shia and Megan entered into a partnership on April 1, 20xx, investing P
L25 Bonus 300,000 and P 250,000 cash, respectively. It was agreed that Shia, the
1.25
managing partner, is to receive a quarterly salary ofP 12,500 and a bonus
of 15% of net income in excess of P 100,000. The
Bonus= 40,920
on December 31, 20xx follows:
unadjusted trial balance
132,580
2. Answer: P
item no. 1 Debit Credit
See Cash P 100,000 P
Accounts receivable 240,000
Answer: P 94,920
3 Equipment 250,000
Seeitem n0. Furniture & Fixtures 180,000
Accounts payable 130,000
Answer: P 152,580
4 40,000 Shia, Capital 300,000
April 1 additional investment Megan, Capital
(25,000) 320,000
July 31 permanent withdrawal Shia, Drawing
October 1 additional investment 15,000 5,000
Megan, Drawing 20,000
November 30 permanent withdrawal (10,000) Sales 1,400,000
Iras 20xx profit share 132,580 Purchases 860,000
Net increase in capital 152,580 Purchase returns & allowances 25,000
5. Answer: P 104,920 Operating expenses 520,000
May 31 additional investment 25,000 2,175,000 2,175,000
August 1 additional investment
50,000
September 30 permanent withdrawal Additional data on December 31, 20xx:
November 30 additional investment (40,000) *Merchandise per physical count disclosesthat unsold merchandise
December 31 permanent 10,000 on December 31 amounted to P 150,000.
Sam's 20xx profit share withdrawal (35,000) Unused supplies as of December 31 amounted to P 8,500.
Net increase in
capital 94,920 O n April 1, the partners paid P 120,000 rent in advance covering
6. Answer: P 302,580 104,920 1-year period starting April 1. The full amount was debited to
1/1/20xx capital balance operating expenses.
Net increase in capital 150,000
during the year 152,580
58 59
 PA-02: PartnershipOperations

all fixed
assets at 120 PA-02: Partnership Operations
to depreciate
per
* I t is the
business'policy be provided.
is yet to Accumulated Depreciation Equipment
-

Depreciation 20,000
annum. Accumulated Depreciation Furniture &Fixtures
-

16,200
Acquisition
Equipment 250,000 x 12% x 8/12 20,000
-

date: Furniture& Fixtures- 180,000 x 12% x 9/12 =16,200

May 1
Equipment
Furniture and fixtures
April 1 Operating expenses 7,200
Allowance for uncollectible accounts
7,200
is estimated to
be uncollectible 240,000 x 3% = 7,200
accounts receivable
3% of the
lgnore income tax. Sales 1,400,000
Less: Cost of goods sold
How much the net income (loss)
is
of the partnership on
Gross profit
685,000
1. 715,000
December 31, 20xx?
share in the net income of the Less: Operatingexpenses (520,000-8,500-30.000 36.200+7,200) 524,900
2. How much is Shia's Net income
190,100
partnership? 2. Answer: P 126,880
How much is Megan's share in the net income of the
Shia Megan TOTAL
partnership? Salary
What is the capital balance of Shia as of December 31,
12,500 x 3 37,500 37,500
20xx? Bonus 13,515
What is the capital balance of Megan as of December 31, [190,100 100,000] x 15% 13,515
20xx? Remainder (30:25*
6. How much is the total assets of the partnership as of 139,085 x 30/55 75,865
December 31, 20xx? 139,085 x 25/55 63.220 139,085
Share in Net income 126,88063,220 190,100
Answers and Solutions Guide to PA-02 Problem 3: *Ratio of capital contributionssince
there is no agreement as to
how the net income allocation would be.
1. Answer: P 190,100
M. inventory 1231
Cost of goods sold
150,000 3. Answer: P 63,220
Purchase returms &alowances
685,000 See item no. 2
Purchases 25,000
860,000 4. Answer: P 421,880
Supplies Shia Megan TOTAL
Operating expenses 8,500 Unadjusted 12/31/20xx capital 300,000 320,000 620,000
8,500 Add: Profit share 126,880 63,220 190,100
Prepaid Rent Total 426,880 383,220 810,100
Operating expenses 30,000 Less: Drawings 5.000) (20,000) (25,000)
120,000 3/12 30,000
x =
30,000 12/31/20xx capital 421.880 363,220 785.10
5. Answer: P 363,220
Operating expenses See item no. 4
36,200
60 61
 PA-02:
P a r t n e r s h i pO p e r a t i o n s

PA-02: Partnership Operations

100,000
232,800 Share in Net income
6. P 915,100
7,200) 92.720 74,080 13.200 240.000
Cash
(240,000-
150,000 VJ MJ+ U=
receivable,
net + 35,000 V + U 25,000 MI + 25,000 35,000 =
Accounts
8,500 MJ 35,000 25,000 M.J 10,000
= -

=
M Inventory 30,000
U+ MJ 25,000- 2,000 LI+ 10,000 =23,000 U=
=

Supplies 230,000
10,000 U=13,000
23,0000-
Prepaid Rent
Equipment, n e t ( 2 5 0 . 0 0 0 - 2 0 , 0 0 0 )

( 1 8 0 , 0 0 0 - 1 6 , 2 0 0 )
163,800 ** Squeeze figure

and Fixtures,
net 915,100 *** VI + MI =
138,000
Furniture
TOTAL ASSETS, 12/31/20xx
U+= 138,000+14.40068,400+ VI =152,400 > VI =152,400
- 68,400 W=84,000
Alternative solution: Liabilities
Partners' Equity 84,000+ MJ = 138,000MI = 138,000-84,000 MJ = 54,000
Assets
785,100
130,000
915,100 2. Answer: P 74,080
PA-02 Problem 4: See item no. 1

that was formed several vear

ears
partners in a
patnership amounto 3. Answer: P 92,720
M3, anc Li are earned a certain
V
ended, the partnership See item no. 1
For the vear just interest on invested capital
ago. total
are paid a
net income.
The patners received P 25,000 in total which
which VJ and PA-02 Problem 5
amounting to
P 35,000
of received in total. The total salaries
than what and MJ wash company that they
is P 2,000 more
while the total salaries of and VJ is P 14,400 Reid, Lustre, Padilla, and Bernardo own a car

of V and MD is P
138.000 balances as of the beginning of the
taken together. Since MJ is the operate as a partnership. Their capital
more than the
salaries of VJ and MJ are as follows: Reid -

P 100,000; Lustre P 90,000; Padilla P

bonus of P 15,000. The remainder is year
managing parther, MI is granted a
120,000; and Bernardo P 100,000. Their agreement inctudes the
in the ratio of 2:3:5. VJ's
share in the
to be divided to V3, MJ, and LI following:
73,200 as his share in the net 10% of
remainder is P (3,280) and D received P
Reid will receive a salary of P 50,000 and a bonus of
income. income after all interests and bonuses.
of 15% of
Padilla will receive a salary of P 45,000 and a bonus
1. How much is the net income of the partnership for the income after all interests and bonuses.
year just ended? Lustre will receive a salary of P 30,000.
2. How much is MJ's share in the net income? A l l partners are to receive a 15% interest on their beginning
3. How much is VJ's share in the net income? capital balances.
to be divided equally among the
Any remaining profits are

Answers and Solutions Guide to PA partners.

-

02 Problem 4:
The
1. Answer: P withdraw throughout the year.
240,000 The partners did not invest nor
VJ MJ TOTAL partnershipreported a net income of P 205,000.
Interest on invested capital" 12.000 10.000 13,000 35,000 share in the net income
of the
Salaries* 84.000 54,000 68400 206,400 1. How much is Reid's
Bonus 15,000 15,000 partnership?
Remaining profits (2:35) 3.280 14920) (8.200) (16,400 63
62
 PA-02:Partnership Operations

the net income of .

PA-02:Partnership Operatioms
share in the
How much
is
Padilla's
28,700 0.1/0.25 P
x

28,700 x 0.15/0.25 P11,480 Reid's bonus

2.
of Lustre? =
partnership?
capital
balance
17,220 Padilla's bonus
What is the ending balance of Bernardo?
capital 2. Answer: P 77,670
What is the ending
distributed in the followi See item no. 1
is to be
capital, then bonuses, th
net income
Assuming the invested then
Interest on 3. Answer: P 130,950
order of priority: or loss percentage...
according to profit Beginning capital balance
salaries, and then share in the net income of the
e 90,000
Bernardo's Share in Net income
5. How much is
Ending capital balance 40,950
partnership?
Lustre's share in the
net income of t h 130,950
6. How much is 4. Answer: P 112,450
partnership? Beginning capital balance
of Reid? 100,000
What is the ending capital balance Share in Net income
balance of Padilla? 12,450
What is the ending capital
Ending capital balance 112450
Answers and Soiutions Guide to PA
-

02 Problem 5: ORDER OF PRIORITY PROVISION

1. Answer: P 73,930 5. Answer: P 15,000
Reid Lustre Padilla Bernardo TOTAL Reid Lustre Padila Bemardo TOTAL
Salaries 50,000 30.000 45,000 125,000 Interest on
Bonus 1480 17,220 28,700 invested capital 15,000
interest 100,000 x 15% 13,500
100.000 x 15% 15,000 90,000 x 15% 18,000
90.000 x 15% 13,500 120,000 x 15% 15,000 61,500
120,000x15% 18,000 100,000 x 15%
100,000 x 15% 15,000 61,500 Bonuses 11,480 17,220 28,700
Remaining profits (equally)2550 (2,550) 2,550) (2,550) (10,200) Salaries
Share in Net income 73,930 40,950 77,670 114,800 x50/125 45,920
12,450 205,000 114,800 x 30/125 27,552
Bonuses 0.25 (Net
Bonuses
=

income Interests Bonuses) 114,800 x 45/125 41,328 114,800

0.25 (205,000 61,500- Bonuses)
= -

Share in Net 12,400 41,052 76,548 15.000 205,000

Bonuses 0.25 (143,500
=

Bonuses 35,875 0.25

Bonuses) -

income
the residual
Total salary allowance is P 125,000 is more than
=

Bonuses+ 0.25 Bonuses

Bonuses *

net income will be

35,875 114,800. The residual
1.25 Bonuses
=
net income of P allowance ratios.
=
35,875 allocated based on their required salary

k5 BonuseS 35,875
6. Answer: P 41,052
1.25 See item no. 5
Total Bonuses =
28,700 7. Answer: P 172,400

64 65
 PA-02:PartnershipOperations

100,000 PA-02: Partnership Operations

Beginning capital balance

72,400 Bonus 0.20 (217.500 +Bonus)

income
in Net 172,400
Share
capital
balance
172400
Bonus 43,500 +0.20 Bonus
Ending Bonus -0.20 Bonus 43,500
=

0.8 Bonus 43,500

=

P 196,548 120,000
8.
A n s w e r :Beginning capital balance
D-8Bonus 43,500
76,548
Share in Net
income 0.8
Ending capital balance
196,548
Bonus P 54,375

PA-02 Problem 6:
20xX and agreed to
sha
are
PA-02 Problem 7
on March 1,
formed a partnership cash of P 150,000. Jern
erry
Ronald, a partner in the Baxter Enterprises which began
Tom and Jerry
20%, respectively.
Tom invested
manages the fir years ago, has a 30% participation in profits and losses.operations several
profit 80% and expertise and Ronald's capital
assets but has
a specialized
withdrawals during the balance had a balance of P 180,000 as of the
invested no
other
investments nor the
year. During the current yea, Ronald invested P
beginning of the current
ful time. There
were no
for the following: 80,000 cash and a
partnership
contract provides property with a market value of P 120,000 and withdrew P 250,000 cash.
vear. The
At year-end, Ronald's capital balance, as shown in the
with interest at 10% statement of
are to be credited annually changes in partner's equity, amounted to P 220,000.
Capital accounts
contribution.
cf original capital
Jerry is to be paid a monthly salary of P 3,000. 1. Determine the net income (loss) of the Baxter Enterprises
before deducting for the current year.
to receive a
bonus of 20% of profit
jerry is and the bonus.
interest on capital balances, salary,
as expensess of
are to be considered Answers and Solutions Guide to PA-02 Problem 7:
Bonus, interest, and salary
the partnership. 1. Answer: P 300,000

statement for the partnership includes the

The 20xx condensed income Ronald, Capital
foliowing: 250,000 180,000 1/1
80,000
P 550,000 120,000
Revenues
Expenses(including salary, interest, and bonus) (375,000) 90,000 SNI
175,000 220.000 12/31
Net income

1. What is Jerry's 20xx bonus? *SNI Share in Net Income

90,000/0.30 = p300,000

Answers and Solutions Guide to PA -

02 Problem 6:
1. Answer: P 54,375
Bonus 020 (Net income + Interest+ Salary + Bonus)
Bonus 0.20 (175.000+ 12.500+30,000 Bonus)
67
66
 Operations
Partnership
PA -

02:

PA-02: Partnership Operations

PA-02 Problem 8:
and
Maranan
formed the MUNOS additional profit is required to comply with her guaranteed minimum
profit share of P 22,000
Lim, Santos, Martin, as follows: Lim -P
On January 2, 20xx, with capital
contributions
partnership Maranan P 180.000 -

Partnership, a Martin P
160,000; 2. Answer: P 14,400
shall receive a 3
120,000; Santos - P 140,000;
stipulates
that each partner
receiv
See item no. 1
agreement and Santos
shall
The partnership
contributed and that Lim agreement
capital The
interest on
P 36,000,
respectively. 3. Answer: P 22,0000
annual salaries of
P 30,000 and be guaranteed to receive See item no. 1
Maranan shall
that Martin and their share in profit
further provides annum as
P 22,000 per
a minimum of P 12,000 and distributed
between Lim, Santos
The balance of
the profits shall be respectively.
PA-02 Problem 9:
in the ratio of 1:2:3:4, Arci, Ellen, and Coleen own a
Martin, and
Maranan
merchandising business organized as a
must be generated by the partnership. Coleen is considering retirement from the partnership. In
net income order to
What amount of measure fairly Coleen's interest in
1.
20xx in order that Lim may receive capital, an audit of the
in the year
partnership company's first wo years of operations was performed in early 20xx. The
share in net income?
P 36,800 as his
how much is Martin's profit
original partnership agreement called for Arci to receive 15% bonus on
2. In relation to the
above item, income after bonus, with the remaining profits or losses to be divided as
share? follows: Arci, 20%; Ellen, 30°%; and Coleen, 50%. Reported net income
items, how much is Maranan's for 20xv was P 49,450. In the second year of operations, the
3. In relation to the above agreement
profit share? called for Arci still to receive 15% bonus on income after bonus, but it
altered the allocation of remaining amounts as follows: Arci, 30%; Elen,
02 Problem 8: 30%, and Coleen, 40%. Reported income for 20xw was P 31,165. The
Answers and Solutions Guide to PA -

partners had always agreed that any adjustment to reported amounts

1. Answer: P 119,8000 would be alocated based on the profit and loss agreement in effect during
Lim Santos Martin Maranan TOTAL the period to which the adjustments relates. The audit indicated that the
Interest on capital contributed
following items were not properly accounted for:
120.000 x 3% x 12/12 3.600
140,000 x 39% x 12/12 4,200 (1) 20xv:
160.000x 39% x 12/12 4,800
(a) Failed to depreciate (in 20xw as well) the equipment
180.000 x 3% x 12/12 5,400 18,000 contributed by Arci. The fair value of the equipment was P
Salaries 30,000 36,000 66,000
Remaining profits (1:2:3:4) 75,000 and should have been depreciated over an 8-year life
3.200 6,400 9.600 12,800 32,000 using straight-line method.
Additional profits (if any) 3,800
Share in Net income 306 (b) Failed to defer prepaid 20xw insurance premiums of P 4,000.
36,800 46,600 14,400 22,000 (119,800 (c) A
capital withdrawal of P 7,000 made by Arci on October 1,
Squeeze figure 20xv, was incorrectly classified as accounts
receivable.

**Requiredadditional profit to earn to P 8,000 of employee salaries & wages on

(MINIMUM PROFIT SHARE FOR MARTINcomply

with the conditions (d) Failed to accrue
AND MARANAN). Martin's share December 31, 20xv.
already exceeded the guaranteed minimum Failed to record sales revenue of P 4,750 earned in 20xv but
need for additional profit to earn for her profit share therefore, no (e)
billed in 20xw.
but for Maranan,
P3,800
69
68
 PA-02: Partnership Operations

o2: Partnership Operations

merchandise invoice
( 2 ) 20xw:
of inventory
included a
not yet received,
Tan Overstatement of utilities expense
but
(a)
Purchases
20xw, for
P 6,400 inluded
inS Net adjustments to net income 1,520
December 31, point.
The item
w a s not
Reported net income (8,625) 3,795
were
shipping
FOB
year-end physical inventory.
in 20xw
Adjusted net income 49450 31,165
record
interest
income of 6,000
earned

properly accried
40,825) 34,960
Failed to utilities expense
(b) P 1,520 of 2. Answer: P 34,960
Failed to
reverse
in expense
recognition in h o
h
(c) resufting See item no. 1
of 20xv,
at the end

years. 3. Answer: (P
capital aCcount balances are.
re: 8,140)
December 31, 20xw 20xv error correction in allocation of net income
Partners' unadjusted Coleen, P 35,000.
P 30,000; and Arci Ellen
Arci, P 25,000; Ellen, Overstatement of Bonus Coleen Total
(1,125) (1,125)
Determine the foliowing:
Remaining additional profits (2:3:5) (1.500)
(2.250) (3.750) (7,500)
Increase in Share in Net income
1. Adjusted 20xv
net incomne. (2.625) (2.250) 3.750) (8.625)
income. *Bonus 0.15 (Overstatement
=

2. Adjusted 20xw net balance on December 31. of Net income Bonus)

Netadjustments to Arci's capital
Bonus 0.15 ((8,625) Bonus)
= -

3.
Bonus (1,293.75) 0.15 Bonus
= -

20xw.
4. Net adjustments to
Ellen's capital balance on December Bonus + 0.15 BonuS (1,293.75) =

31, 20xw. 1.15 Bonus (1,293.75) =

5. Net adjustments to Coieen's capital

balance on December
31, 20xw. 1A5 Bonus (1,293.75)
6. Arci's adjusted December 31, 20xw capital balance. 1.15
7. Ellen's adjusted December 31, 20xw capital balance.
8. Coleen's adjusted December 31, 20xw capital balance. Bonus adjustment= (1,125)

20xw error correction in allocation of net income

Answers and Solutions Guide to PA-02 Problem 9:
Arci Ellen Coleen TOTAL
1. Answer: P 40,825 Overstatement of Bonus 495 495
Correction of error analyzation: Remainder (3:3:4) 990 990 1,320 3,300
Decrease in Share in Net income 1485 990 1320 3.795
20x 20xw
(1) *Bonus = 0.15 (Understatement of Net income - Bonus)
Understaiemient of depreciation (75,000/8) Bonus = 0.15 (3,795- Bonus)
Over(underjstatement of insurance expense (9,375) (9,375)
Under(overstatement of accrued salaries &wages 4,000 (4,000) Bonus =
569.25
Bonus +0.15 Bonus = 569.25
0.15 Bonus
Understatement of sales revenue (8,000) 8,000 1.15 Bonus = 569.25
(2) 4,750 (4,750)
Understatement of ending
Understatement of interest inventory 115Bonus 569.25
income 6,400
I5 1.15
6,000
70 71
 PA-02: Partnership Operations

PA-02: Parbnership Operations

When the reported n e t
495. Note:
=
wnole bonus should (2) On
Bonus adjustment
a net l0ss, tne April 1, Jake invested an additional P
corrected, is really
income, if
Remember the rule that when a
partnership
Ejay invested an additional P 30,000 into 15,000 and on August 1,
the partnership.
be deducted. there is n0 bonus. (3) Throughout 20xx, a 52-week year, each
loss for the perioa, partner withdrew P 400
Suffered a net per week in anticipation of
Ellen Coleen partnership
considered these as regular withdrawals and
net profit. The partners
Arci therefore are not to
be included in the
computation of weighted average capital
Net adjustments (2.625) (2,250) (3,750) balances for of
purposes income distributions.
income adjustments
20xv share in net
classified capital
withdrawal (7,000)
Incorrectly 1485 990 1,320 Jake and Ejay have agreed to distribute partnership net
20xw share in net
income adjustments
to the following plan: profit according
Total net adjustments
8,140) 1.260) 2.430)

Coleen Ejay Jake

Arci Ellen Interest on weighted average capital balances 10% 10%
Unadjusted capital 25,000 30,000 35,000 Bonus on net profit before salaries, but after interests and bonus
25%
Net adjustments (8.140) (1.2 (2.430) Salaries P 30,00 P2 5,0
Adjusted capital 16,860 28,740 32,570 Residual (if positive) 30% 70%
Residual (if negative) 50% 50%
4. Answer: (P 1,260) 1. How much is the bonus credited to Jake?
See item no. 3 2. How much is the share of Ejay in the partnership net
profit?
5. Answer: (P 2,430) 3. How much is the share of Jake in the partnership net
See item no. 3 profit?
4. What is the capital balance of Jake on December 31,
6. Answer: P 16,860 20xx?
See item no. 3 5. What is the capital balance of Fjay on December 31, 20xox?

7. Answer: P 28,740
See item no. 3 Answers and Solutions Guide to PA- 02 Problem 10:
1. Answer: P 12,725
8. Answer: P 32,570 Number of months to Dec. 31 Peso-Month Approach
Beg. Bal 40,000 x 3/12 10,000
See item no. 3 Beg. Bal 40,000 x12/12= 40,000 4/1 55,000 x 9/12= 41,250
4/1 15,000 x 9/12 11,250 OR
51.250
Jake's average capital 51.250
PA-02 Problem 10:
The Statement of Comprehensive Income Beg Bal 100,000x 7/12= 58,333
of Jake and 100,000 x12/12= 100,000
31, 20xx show a net profitEjay Partnership for
the year ended December Beg. Bal 8/1 130,000 x 5/12 54,167
OR
capital of P 80,000. The 8/1 30,000x5/12 12,500 112,500
accOunts
of the partners for 20xx
shows the following: Ejay's average capital 112,500
(1) Jake and Ejay began the year with
and P 100,000, capital balances of P 40,000
respectively.
72
73
 PA-02: Partnership Operations
PA-02: Partnership Operations
Jake Ejay TOTAL
Interest on
invested capital
5,125 PA-02 Problem 11:
51,250 x 10% x 12/12
11,250 6,375 Maja and Coco formed a
partnership on January
12/12
initially invested 1, 20xx.
350,000 and P 150,000, Maja
112,500 x 10% x 12,725 a total of P and
Coco
12,725
partners did invest additional assetsrespectively.
Bonus 25,000 30,000 55,000 not withdraw nor The
Salaries year. throughout the
Residual
7:3 if positve
2,050) (2,050) (4,100) Case 1: Maja and Coco agreed to share profits and losses
For the year in the ratio of
5.5 if negative
40,800 39,200 80,000 80:20. 20xx, the partnership generated a net income
Share in Net income 100,000. offP
Bonus) Interests
-

*Bonus =
0.25 (Net income-
16,375- Bonus) How much is the profit share of each partner?
Bonus =
0.25 (80,0O0-
0.25 (63,625 Bonus)
-

Bonus =

Bonus = 15,906.25
-

0.25 Bonus Case 2: Maja and Coco agreed to share profits and losses in the ratio of
Bonus+ 0.25 BonUs
=
15,906.25 80:20. For the year 20xx, the partnership suffered a net loss of P 100,000.
I.25 BonUs = 15,906.25
How much is the share in the net loss of each partner?
125 Bonus15,906.25 Case 3:
1.25
Maja and Coco agreed to share profits in the ratio of 80:20. For
.25 the year 20xx, the partnership generated a net income of P 100,000.
Bonus = 12,725
How much is the profit share of each partner?

2. Answer: P 39,200 Case 4: Maja and Coco agreed to share profits in the ratio of 80:20. For
See item no. 1 the year 20xx, the partnership suffered a net loss of P 100,000.

3 Answer: P 40,800 How much is the share in the net loss of each partner?
See item no. 1
Case 5: Maja and Coco agreed to share losses in the ratio of 80:20. For
Answer: P 75,000 the year 20x, the partnership suffered a net loss of P 100,000.
Jake Ejay
Beginning capital balance 40,000 100,000 How much is the share in the net loss of each partner?
Add: Additional investments 15,000 30,000
20x Profit share of 80:20. For
40,800 39,200 Case 6: Majaand Coco agreed to share losses in the ratio
Tota 95,800 169,200 net income of P 100,000.
the year 20xx, the partnership generated a
Less:Drawings (400/week x 52 weeks)20800) (20,800)
12/31/20xx capital balance 75.000 148,400 How much is the profit share of each partner?
5. P 148,400
See itemno. 4

74 75
 Operations

Partnership

-02:

PA .

how to
allocate
net

come or PA-02: Partnership Operations

to income of P
partners
are
silent
as
g e n e r a t e d a
net
100,000
7: The
partnership
Case
20xx,the partner?
CASE 8: No P&L ratio; Net loss =
(100,000)
year
For the of
each (100,000) x 350/500
the profit
share
ine.
(100,000) x 150/500 (70.000)
How
much is
silent a s
to how to allocate net me or loss, (30,000)
are
uffered
s u f f e r e d a a n e t .loss of P
net 100,000,
Case 8:
The
partners
partnership PA-02 Problem 12:
20xx, the
For the
vear

loss of
each partner? Pops and John are partners in a manufacturing business located in Bataan.
net
in the Their profit and losS agreement contains the following
How much
is the
share
A bonus to Pops of 10% of net income after provisions:
bonus.
to PA
-

02
02 Problem 11: Salaries of P 20,000 and P 25,000 for Pops and John,
Solutions
Guide respectively.
Interest on weighted average capital at the rate of 4%.
and
Answers
P 100,000
Annual
drawings in excess of P 30,000 are considered to be a direct
Net income orloss
=
Maja Coco
= 100,000
charge to capital.
80.20. Net income Any remaining profits or losses are to be divided
CASE 1: P&L ratio 80,000 equally among
100000 80 the partners.
100.000x 20%
20.000
and drawing activities of the partners for the year 20x
CASE 2 P&L ratic 80.20 Net
ioss =
(100,000) Capital
follows:
are as

100.000 B0% 80,000

100.000x 20 20,000 Pops, Pops John, John,
CASE 3: Profit ratio 80:20; Net income = 100,000 Capital Drawing Capital Drawing
|Beg. Bal P50,000 P P 60,000 P
100.000x80% 80,000 Feb. 1 40,000
100.000x20% 20.00 March 31 20,000
May 31 10,000 5,000
CASE 4: Profit ratio 80:20, Net loss (100,000)
=
July 1 25,000 10,000
(100 000) x80%
(100 .000) x20%
(80,000) October 1 2,000
(20,00) October 31 15,000 3,000
CASE 5: Loss ratio 80:20 Net loss = Nov. 1 20,000
(100.000)x 80% (100,000) Dec. 1 5,000
The partnership earned a net income of P 66,000 for the year 20xx.
(100,000) x20% (80,000)
(20,000)
1. How much net income was allocated to Pops?
CASE 6: ratio 80:20 Net
100,000x350/500 income 100,000 =
2. How much net income was allocated to John?
100,000 x150/500 3. What is the ending capital balance of Pops?
70,000
30,000 4. What is the ending capital balance of John?
CASE7: No P&L ratio, Net income
100,000x350/500 100.000
100,000x150/500 70,000
30,000 17
76
 PA-02: Partnership Operations

02 Problem
19.
12: PA-02: Partnership Operations
to PA
-

Guide
Solutions 3. Answer: P
Answers
and 74,900
P 32,900 Peso-Month approach Beginning balance
50,000
1.
Answer:

of days to
December
31 Beg. Bal 50,000x3/12 12.50 Add: Additional
investments (20,000+
20xx Profit share 10,000+2,000) .000
Number 5 0 , 0 0 0x 1 2 / 1 2 = 5 0 , 0 0 0

3/31 70,000 x 2/12 =11 ,900

Total
Be Bal 20.000 x 9/12= 5000
OR 5/31 80.000 x 4/12 26,667 Less: 4,900
3/31 10,000x 7/12= 5,833 10/1 82,000x 1/12 =
6833 Drawings (25,000+ 15,000) (40,000)
3 500 Pops' 12/31/20xx capital balance
2,000 x 3/12= 10/31 72,000 x 2/12
12,000 74,900
10/1 2/12= (1,667)
(10,000" x
10/31
Pops average capital
69,667 69,667 4. Answer: P 106,100
Beg. Bal 60,000 x 1/12 = Beginning balance 000
60,000 5,000 Add: Additional investrments (40,000+5,000+3,000)
60.000 x 12/12= 2/1 100,000 x 4/12 =
33333 48,,000
Ba
Beg. ba 11/12= 36,667 ODR 105,000 x 5/12
20xx Profit share
100
43,750
=
21 40.000 x 5/31 Total
2,917 141,100
5,000 x 7/12= 10/31 108,000 x 1/12 =
9,000 Less: Drawings (10,000 +20,000+5,000)
3.000 x 2/12= 500 103,000 x 1/12 = (35,0,000)
0/31 (5,000) x 1/12=(417)
12/1 8,584 John's 12/31/20xx capital balance 106,100
121 99 667 99.667
10.000
allowable drawings of 30,000
=

40,000 Withdrawa PA
-

25,00015,000
=
02 Problem 13:
Considered as permanent Ricky, Dicky, and Vicky formed the RDV Partnership on January 1, 20x.
John TOTAL The original investments and profit and loss ratio were as follows: Ricky-
Pops
6,000 P160,000 (20%); Dicky P 240,000 (30%); Vicky P 400,000 (50%).
-

6,000
Bonus 20,000 25,000 45,000 According to the partnership agreement, profit or loss will be divided
Saiaries among the partners as follows:
interest orn invested capital Each partner shall receive an annual salary of P 20,000.
69.667 x 4% x 12/12 2,787 the managing partner, shall receive a bonus equal to
5%
3,987 6,774 Vicky,
99.667 x 4% x 12/12
of net income before deducting salaries.
Remaining profits losses (1:1) 4113 ,113 8,226 shall be divided among the
Any remaining profits and losses
or

Share in Net income 32,900 33,100 66,000 and loss ratio.

partners on the basis of their profit
earned net income of P 46, 500.
Bonus = 0.1 (Net i n c o m e - Bonus) For the year 20xx, the partnership
Bonus = 0.1 (66,000- Bonus) balances
income to partners, the capital
Bonus = 6,600- 0.1 Bonus Case 1: After allocating the net outside of the
into the profit and loss ratio by payments
Bonus +0.1 Bonus = 6,600 are to be brought remain unchanged.
total partnership capital to
B o n u S = 6,600 firm among partners, the between or among
transfers a r e required
HBonus 6,600 1. What cash
partners?
1.1 the capital balances
the net income to partners, lowest possible cash
Bonus = 6,000 Case 2: After allocating loss ratio by the
into the profit and
are to be brought from the firm by
the partners.
withdrawal
investment and/or cash
2.
Answer: P 33,100 79
See item no. 1

78
 PA-02:Patnership Operations

withdrawal
and/or Is PA-02: Partnership Operations
additional
investments
are
1. What
required?
176,835/0.2 884,175 Ricky
255,252/0.3 = 850,840 DICKY
02 Problem 13: 414,413/0.5
Guide to PA 828,826 Vicky
-

Solutions
Answers and

Dicky Vicky TOTAL Entry:

Ricky 20,000 60,000 Ricky, Capital 6,667
20,000 20,000
Salaries 2,325 2,325 Cash 4,340
(15,825) Vicky, Capital
Bonus
Remainder (23:5) 165) (4,748) (7.912) 45. 500 11,007
16.835 15,252
14,413 46,500
Share in net income 800,000
1/1/20xx capital balance
160.000 240,000 400,000 PA-02 Problem 14:
12/31/20xx capital balance
176,835 255,252 414,413 846,500 Pattie, Aurea, and Adriano formed a
Pattie and Aurea both contributed P partnership
on February 1, 20xx.
150,000 each while Adriano, on the
other hand, invested no assets but has a
CASE 1 specialized expertise and
manages the firm full time. The partners did not withdraw
Ricky Dicky Vicky TOTAL nor invest
Capital balances
176,835 255,252 414,413 846,500 additional assets throughout the year.
Required capital CASE 1:The partnership reported a net income
846 500 x 20% 169,300 of P 140,000 for the year
B46.500 x 30% 253,950 20xx. The partners agreed to share profits and losses in the ratio of 4:4:2.
846.500 x 50% 423,250 846,500 How much is the
Cash transferred (received) (7.535) (1,302) 8,837 profit share of each partner?
CASE 2: The partnership suffered a net loss of P 150,000 for the year
20xx. The partners agreed to share
Entry profits and losses in the ratio 5:3:2.
Ricky, Capital 7,535 How much is the loss share of each
Dicky, Capital 1,302 partner?
Vicky, Capital 8,837 CASE 3 The partnership reported a net income of P
160,000 for the year
20xx. Adriano, the managing partner, is to receive 25% of the
profit as
her just and equitable share in the partnership
CASE 2 profits. The capitalist
partners will divide the remaining profits and losses in the ratio of 4:2,
Capital balances Ricky Dicky Vicky TOTA respectively.
176,835 255,252 414,413 846,
Required capital"
850,840 x 20% How much is the profit share of each partner?
850,840x 30% 170,168
850,840x 50% 255,252 CASE 4: The partnership reported a net income of P 170,000 for the year
Required additional investment (withdrawal) 425,420 850.8 20Xx. Adriano, the managing partner, is to receive 25% of the profit as
Trial and error test (6.667) 11,007 4,340 her just and equitable share in the partnership profits. The partners do
not have any agreement regarding their profit and loss ratio.

80 81
 PA-02: Partnership Operations

partner? PA-02: Partnership Operations

share of each
is the profit
How much
of P 180,000 for 140,000 x 20%
suffered a
net loss
regarding their
Droes ear 28,000140,000
CASE 5: The
partnership
have any
agreement and CASE 2
partners
do not
20xx. The Pattie
oss ratio. Loss share
Aurea Adriano TOTAL
partner? (150,000) x 50%
share of each (75,000)
is the loss (150,000) x 30%
How much
Adriano also invect (45,000)
from managing
the firm full time,
for th P (150,000) x20% (30,000) (150,000)
CASE 6: Aside income of P 190,000
reported a net
partnership industrial partner, is to
receive CASE 3
100,000. The
character as an
20xx. Adriano,
in her share in the partnership profits
ni Pattie Aurea Adriano TOTAL
her just and equitable h e capitalist partnerc Industrial partner's profit share
of the profit as a capitalist partner.
character as 160,000 x 25%
profit share in her ratio of 4:4:2. 40,000 40,000
agreed to share
proits in the Capitalist partners' profit share
160,000 x 75% x 4/6 80,000
each partner?
How much is the profit share of 160,000 x 75% x 2/6
40,000 120,000
the firm full time, Adriano
also invested p 80,000 40.000 40,000 160,000
CASE 7: Aside from managing for the vear CASE 4
suffered a net loSs of P 200,000
100,000. The partnership in the ratio of 4:4:2, Pattie Aurea Adriano TOTAL
to share profits and losses
20xx. The partners agreed Industrial partner's profit share
170,000 x 25% 42,500 42,500
How much is the loss share of
each partner?
Capitalist partners' profit share
170,000 x 75% x 150/300 63,750
Adriano also invested P
CASE 8: Aside from managing the firm full time, 170,000 x 75% x 150/300 63,750 127,500
The partnership suffered a net loss of P 210,000 for the year 63,750 63,750 42,500 170,000
100,000.
20xx. The partners do not have agreement regarding their profit and loss
ratio CASE 5 TOTAL
Pattie Aurea AdrianoD
How much is the loss share of each partner? Industrial partner's loss share
Capitalist partners' toss share
Answers and Solutions Guide to PA 02 Problem 14: (180,000)x 150/300 (90,000)
(180,000) x 150/300 (90,000)
Apply art. 1797 (180,000)

CASE 1 CASE 6 TOTAL

Pattie Aurea Adriano
Profit share
Pattie Aurea Adriano TOTAL
Industrial partner's profit share 47,500 47,500
140,000 x 40%
56,000 190,000 x 25%
140,000 x 40%
56,000 83
82
 PA-02: Partnership Operations

Capitalist partners' profit share

190,000 x 75% x 40% 57,000
190,000 x 75% x 40% 57,000
190,000 x 75% x 20%
28,500 142,500
57,000 57,000 Z6,000
CASE 7
190
190,000
Pattie Aurea Adriano
Industrial partner's loss share TOTAL
Capitalist partner's loss share
(200,000) x 40% (80,000)
(200,000) x 40% (80,000)
200,000) x 20%
Note: In the absence of agreement, the
(40,000) (200.000
capitaist-industrial partner. i
his/her character as industrial
partner, shall have no share in the
losses
but in his/her character as
capitalist partner, he shall have share in thees
losses in proportion to his capital contributions.

CASE 8
Pattie Aurea Adriano TOTAL
Industrialpartner's loss share
Capitalist partner's loss share
(210,000) x 150/400
(210,000) x 150/400 (78,750)
(210,000) x 100/400 (78,750)
(52,500) (210,000
****

84