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CHAPTER 1

Partnership Formation and Operations


EXERCISES
Exercise 1 1
1.a

Campos, Capital
Allowance for Uncollectible Accounts

14,000

Goodwill
Campos, Capital

30,000

14,000
30,000

Accumulated Depreciation
Campos, Capital
Furniture and Fixtures

1.b

6,000
6,500
12,500

Campos, Capital
Cash

40,000

Cash (P83,500 x 1/2)


Tomas, Capital
To record contributions of Tomas

41,750

40,000
41,750

Req. 2.
Campos and Tomas Partnership
Statement of financial Position
July 1, 2008
Assets
Cash
Accounts Recl
Less Allowance for
Uncol Accts.
Inventory
Furniture
Goodwill
TOTAL ASSETS

Liabilities & Owners Equity


P60,000
24,000

P41,750
36,000
100,000
7,500
30,000
P215.250

Accounts Payable
Campos, Capital
Tomas, Capital

P90,000
83,500
41,750

________

TOTAL LIABILITIES &


OWNERS EQUITY

P215,250

Exercise 1-2
1.

2.

Cash
Accounts Receivable
Merchandise Inventory
Equipment
Allowance for Uncollectible Accounts
Accounts Payable
Notes Payable
Bernal, Capital
Cash

90,000
36,000
54,000
25,000
2,000
21,000
18,000
164,000
100,000

AA 1 - Chapter 1 (2008 edition)

page 2

Camino, Capital

100,000

Exercise 1 3
1.

2.

Cash
Land
Building
Legaspi, Capital
Sabino, Capital

800,000
540,000
900,000

Cash
Land
Building
Legaspi, Capital
Sabino, Capital

800,000
540,000
900,000

800,000
1,440,000

1,120,000
1,120,000

Exercise 1 - 4
1.

2.

Income Summary
Santos, Capital (P238,000 x 260/425)
Abad, Capital (P238,000 x 165/425)

238,000

Income Summary
Santos, Capital (P238,000 x 3,125/5,000)
Abad, Capital (P238,000 x 1,875/5,000)

238,000

Santos:
Jan. 1 Mar. 31
Apr. 1 Apr. 30
May 1 July 31
Aug. 1 Dec. 31
Abad:
Jan. 1 May 31
June 1 Aug. 31
Sept.1 Dec. 31
3.

P165,000 x 5
215,000 x 3
195,000 x 4

148,750
89,250
P780,000
290,000
1,080,000
1,600,000
P3,750,000/12
P825,000
645,000
780,000
P2,250,000/12

Income Summary
Santos, Capital
Abad, Capital
Interest on ave. capital
Salaries to partners
Balance - equally
Net Profit

4.

P260,000 x 3
290,000 x 1
360,000 x 3
320,000 x 5

145,600
92,400

Income Summary
Santos, Capital
Abad, Capital

P312,500

P187,500
238,000
147,750
90,250

Santos
P 18,750
150,000
( 21,000)
P 147,750

Abad
11,250
100,000
( 21,000)
P
90,250
P

Total
P 30,000
250,000
(42,000)
P238 000
238,000
164,840
73,160

AA 1 - Chapter 1 (2008 edition)

page 3

Santos
Bonus to Santos
25% (P238,000 - B)
Interest of 6% on excess
average investment
6% (P312,500 - P187,500)
Balance - 3:2
Net Profit

5.

Abad

Total

P 47,600
7,500
109,740
P 164,840

P 47,600

73,160
P73,160

Income Summary
Santos, Capital (P238,000 x 15/25)
Abad, Capital (P238,000 x 10/25)

7,500
182,900
P238,000

238,000
142,800
95,200

Exercise 1 5
Sanchez and Gomez
Schedule of Distribution of Net Profit
December 31, 2008
Sanchez
Gomez
6% interest on average capital
P 6,246
P 14.440
10% bonus on net profit after interest
8,331
Salaries
20,000
30,000
Balance 70%, 30%
17,488
7,495
Net Profit
P52,065
P51,935
Computation of average capital:
Sanchez, Capital
Jan. 1
P81,600 x 3
P 244,800
Apr. 1
P111,600 x 9
1,004,400
P1,249,200
Ave. capital (P1,249,200/12)

P104,100

Jan. 1
Aug. 1

Total
P 20,686
8,331
50,000
24,983
P104,000

Gomez, Capital
P224,000 x 7
P1,568,000
P264,000 x 5
1,320,000
P2,888,000

Ave. capital (P2,888,000/12)

P240,667

Computation of bonus: P160,000 x 65%= P104,000 P20,686 x 10% = P8,331


2.
Sanchez and Gomez
Statement of Partners Capital
For the Year Ended December 31, 2008
Capital, January 1
Additional investment
Net profit
Drawings
Capital, December 31
3.
6% interest on average capital
10% bonus on net profit after interest
Balance Salary ratio
Net Profit

Sanchez
P 81,600
30,000
52,065
( 41,600)
P122,065

Gomez
P224,000
40,000
51,935
( 41,600)
P274,335

Total
P305,600
70,000
104,000
( 83,200)
P396,400

Sanchez
P 6,246
8,331
34,083
P48,660

Gomez
P14.440

Total
P 20,686
8,331
74,983
P104,000

40,000
P 55,340

AA 1 - Chapter 1 (2008 edition)

page 4

Exercise 1-6
1.
8% interest on beg capital
Salaries
Balance 3:2
Net Profit

Mercado
P 48,000
225,000
( 38,700)
P234,300

Puzon
P 54.000
112,500
( 25,800)
P140,700

Total
P102,000
337,500
( 64,500)
P375,000

8% interest on beg capital


Balance Salary ratio
Net Profit

Mercado
P 48,000
182,000
P230,000

Puzon
P 54.000
91,000
P145,000

Total
P102,000
273,000
P375,000

2.

3.

Puzon P375,000 x 2/3 = P150,000; however, minimum guaranteed amount is P160,000


Mercado P375,000 P160,000 = P215,000
Exercise 1 7
Net profit after salary, interest and bonus
Interest
P200,000 x 10%
Salary
P8,000 x 12
Net profit before interest and salary
Bonus rate
Amount of bonus to Lirio

P374,000
P20,000
96,000

116,000
P490,000
x 25%
P122,500

Exercise 1 8
1.

B = .25 x P500,000 = P125,000

2.

B = .25 x P500,000 = P100,000


1.25

3.

B
T
B
B

= .25 (P500,000 - Tax)


= .35 x P500,000 = P175,000
= .25 (P500,000 P175,000)
= P 81,250

4.

B
B
B
B
B

= .25 (P500,000 - B - Tax)


= .25 (P50,0000 - B - P175,000)
= P81,250 - .25B
= P81,250/1.25
= P65,000

Exercise 1 - 9
1.
Salary
Bonus
Interest

Estrella
P40,000
6,000
10,000

Felipe
P20,000
4,000
9,000

Garcia
P 4,000

Jimenez
P 9,400

Total
P 60,000
10,000*
32,400

AA 1 - Chapter 1 (2008 edition)

Balance
Total

page 5

26,900
26,900
P82,900
P59,900
*B = 5% (P210,000 B) = P10,000

26,900
P30,900

26,900
P36,300

107,600
P210,000

Garcia

Jimenez

P 4,000
( 43,100)
(P39,100)

P 9,400
( 43,100)
(P33,700)

Total
P 60,000
32,400
(172,400)
(P 80,000)

2.
Estrella
P40,000
10,000
( 43,100)
P 6,900

Salary
Interest
Balance
Total

Felipe
P20,000
9,000
( 43,100)
(P 14,100)

3.
Interest
Bonus
Salary
Total

Estrella
P10,000
6,000
25,067
P41,067
*P37,600 x 4/ 6 = P25,067;

Felipe
Garcia
P 9,000
P 4,000
4,000
12,533
_______
P25,533
P 4,000
P37,600 x 2/ 6 = P12,533

Jimenez
P 9,400
________
P 9,400

Total
P 32,400
10,000
37,600*
P 80,000

Exercise 1-10
1.

2.

Fees Earned
Joseph, Capital
Luis, Capital
Operating Expenses
Income Summary

750,000
50,000

Income Summary
Joseph Capital
Luis, Capital
Nicolas, Capital

500,000

200,000
100,000
500,000
150,000
250,000
100,000

Exercise 1 11
1.
Capital balances before payment
of cash
Required capital balances based on
on profit and loss ratio
Cash received (paid)

Benito

Cabral

Duenas

Total

P120,000

P100,000

P100,000

P320,000

128,000
(P 8,000)

112,000
(P 12,000)

80,000
P 20,000

320,000
-

Journal entry on the partnership books


Duenas, Capital
Benito, Capital
Cabral, Capital

20,000
8,000
12,000

2.
Capital balances before additional
cash investment
Required capital balances based on

Benito

Cabral

Duenas

P120,000

P100,000

P100,000

Total
P320,000

AA 1 - Chapter 1 (2008 edition)

page 6

lowest possible cash investment*


160,000
140,000
100,000
400,000
Required additional cash investment
P 40,000
P 40,000
P 80,000
* P120,000/40% = P300,000; P100,000/35% = P285,174; P100,000/25% = P400,000
Journal entry on the partnership books
Cash
Benito, Capital
Cabral, Capital

80,000
40,000
40,000

3.
Capital balances
Required capital
Additional investment(withdrawals)

Benito
P120,000
120,000
--------

Cabral
P100,000
105,000
5,000

Duenas
P100,000
75,000
(P
25,000)

Duenas, Capital
Cash
Cabral, Capital

Total
P320,000
300,000
P 20,000

25,000
20,000
5,000

Exercise 1 12
Enriquez and Flores
Schedule Showing Adjustments in Capital
For the Year Ended December 31, 2008
Reported net profit
Adjustments:
Equipment purchased charged to expense
Depreciation on equipment
Overstatement of 2008 ending inventory

P400,000
P200,000
( 20,000)
( 24,000)
P156,000
x 65%

Corrected net profit

101,400
P501,400

Distribution of 2008 net profit


Salaries
Interest
Balance
Distribution of 2008 corrected net profit
Salaries
Interest
Balance
Adjustments

Enriquez
P120,000
30,000
51,000
P201,000

Flores
P120,000
45,000
34,000
P199,000

Total
P240,000
75,000
85,000
P400,000

P120,000
30,000
111,840
P261,840
P 60,840

P120,000
45,000
74,560
P239,560
P 40,560

P240,000
75,000
186,400
P501,400
P101,400

AA 1 - Chapter 1 (2008 edition)

2.

page 7

Equipment
Enriquez, Capital
Flores, Capital
Accumulated Depreciation
Inventory
Income Tax Payable

200,000
60,840
40,560
20,000
24,000
54,600
PROBLEMS

Problem 1 1
1.

a.
b.
c.

d.

e.

f.
g.

Merchandise, Inventory
Ruiz, Capital

60,000

Ruiz, Capital
Allowance for Uncollectible Accounts

30,000

60,000
30,000

Interest Receivable
Ruiz, Capital
P150,000 x 6% x 2/12 = P1,500

1,500

Ruiz, Capital
Interest Payable
P300,000 x 10% x 3/12 = P7,500

7,500

Accumulated Depreciation
Ruiz, Capital
Furniture and Fixtures

1,500

7,500
180,000
60,000
240,000

Office Supplies
Ruiz, Capital

5,000
5,000

Cash
Santos, Capital

524,500
524,500
Ruiz and Santos
Statement of Financial Position
December 1, 2008
Assets

Cash
Notes Receivable
Accounts Receivable
Less Allowance for Uncollectible Accounts
Interest Receivable
Merchandise Inventory
Office Supplies
Furniture and Fixtures
Total Assets
Liabilities and Capital
Notes Payable

P
P900,000
90,000

P300,000

764,500
150,000

810,000
1,500
300,000
5,000
480,000
P2,511,000

AA 1 - Chapter 1 (2008 edition)

page 8

Accounts Payable
Interest Payable
Total Liabilities
Ruiz, Capital
Santos, Capital
Total Capital
Total Liabilities and Capital

630,000
7,500
P 937,500
P1,049,000
524,500
1,573,500
P2,511,000

Problem 1-2
1.

2.

Cash
Merchandise Inventory
Tomas, Capital

518,000
1,152,000

Accounts Receivable
Merchandise Inventory
Office Equipment
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Vicente, Capital

1,792,000
256,000
160,000
198,000

1,670,000

160,000
576,000
1,670,000

Tomas and Vicente


Statement of Financial Position
June 1, 2008
Assets
Cash
Accounts Receivable
Less Allowance for Uncollectible Accounts
Inventories
Office Equipment
Goodwill
Total Assets
Liabilities and Capital
Accounts Payable
Tomas, Capital
Vicente, Capital
Total Liabilities and Capital

P
P1,792,000
160,000

518,000

1,632,000
1,408,000
160,000
198,000
P3,916,000
P 576,000

P1,670,000
1,670,000

3,340,000
P3,916,000

Problem 1 3
1.

Merchandise Inventory
Goodwill
Accumulated Depreciation
Allowance for Uncollectible Accounts
Equipment
Rosas, Capital
Cash
Accounts Receivable
Merchandise Inventory

3,000
3,000
900
1,000
2,000
3,900
5,000
46,000
108,000

AA 1 - Chapter 1 (2008 edition)

2.

page 9

Equipment
Furniture and Fixtures
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Perlas, Capital

12,000
9,000
3,000

Cash
Accounts Receivable
Merchandise Inventory
Equipment
Furniture and Fixtures
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Perlas, Capital

5,000
46,000
108,000
12,000
9,000
3,000

Cash
Accounts Receivable
Merchandise Inventory
Equipment
Goodwill
Allowance for Uncollectible Accounts
Accounts Payable
Rosas, Capital

7,000
49,000
75,000
7,000
3,000

Problem 1 4
1.
Cash
Inventories
Equipment
Notes Payable
Serrano, Capital
Cash
Land
Mortgage Payable
Torres, Capital

4,000
54,000
125,000

4,000
54,000
125,000

5,000
36,000
100,000
900,000
1,500,000
3,000,000
1,050,000
4,350,000
600,000
6,000,000
1,950,000
4,650,000

Torres, Capital
Serrano, Capital

150,000

Purchases
Accounts Payable

900,000

Accounts Payable
Cash

720,000

Mortgage Payable
Interest Expense
Cash

300,000
120,000

Notes Payable
Interest Expense

225,000
75,000

150,000
900,000
720,000

420,000

AA 1 - Chapter 1 (2008 edition)

page 10

Cash

300,000

Accounts Receivable
Sales

3,450,000

Cash
Accounts Receivable

3,150,000

3,450,000
3,150,000

Selling and General Expenses


Cash
Accumulated Depreciation
Accrued expenses

870,000

Serrano, Drawing
Torres, Drawing
Cash

351,000
351,000

Income Tax
Income Tax Payable

204,750

630,000
150,000
90,000

702,000
204,750

Inventories, end
Sales
Inventories, beginning
Purchases
Selling and General Expenses
Interest Expense
Income Tax
Income Summary

600,000
3,450,000
1,500,000
900,000
870,000
195,000
204,750
380,250

Income Summary
Serrano, Capital
Torres, Capital
Interest on beginning capital
Salaries
Remainder 60%, 40%
Net Profit

380,250
192,150
188,100
Serrano

Torres

Total

P180,000
150,000
( 137,850)
P192,150

P180,000
100,000
( 91,900)
P188,100

P360,000
250,000
( 229,750)
P380,250

Serrano, Capital
Torres, Capital
Serrano, Drawing
Torres, Drawing

351,000
351,000
351,000
351,000

Serrano and Torres Partnership


Statement of Recognized Income and Expenses
For the Year Ended December 31, 2008
Sales
Cost of Goods Sold:
Inventories, beginning
Purchases

P3,450,000
P1,500,000
900,000

AA 1 - Chapter 1 (2008 edition)

page 11

Cost of Goods Available for Sale


Less Inventories, end
Gross Profit
Selling and General Expenses
Operating Income
Interest Expense
Net Profit before Income Tax
Income Tax
Net Profit

P2,400,000
600,000

1,800,000
P1,650,000
870,000
P 780,000
195,000
P 585,000
204,750
P 380,250

Serrano and Torres Partnership


Statement of Financial Position
December 31, 2008
Assets
Current Assets:
Cash
Accounts Receivable (P3,450,000 P3,150,000)
Inventories
Property, Plant and Equipment:
Land
Equipment
P3,000,000
Less Accumulated Depreciation
150,000
Total Assets

Liabilities
Current Liabilities:
Accounts Payable (P900,000 P720,000)
Accrued Expenses
Income Tax Payable
Long-term Liabilities:
Notes Payable (P1,050,000 P225,000)
Mortgage Payable (P1,950,000 P300,000)
Total Liabilities

P1,878,000
300,000
600,000

P 2,778,000

P6,000,000
2,850,000

8,850,000
P11,628,000

P180,000
90,000
204,750 P
P 825,000
1,650,000

474,750

2,475,000
P 2,949,750

Capital
Serrano, Capital
Torres, Capital
Total Capital

P4,341,150
4,337,100
8,678,25
0
P11,628,000

Total Liabilities and Capital


Problem 1 - 5

1. P2,700,000 (P200,000 + P1,100,000 + P500,000 + P1,500,000 P600,000 = P2,700,000)


2 P2,600,000. (P2,500,000 + P2,700,000) / 2 = P2,600,000
Problem 1 6
1.

Income Summary

700,000

AA 1 - Chapter 1 (2008 edition)

page 12

Bernabe, Capital
Burgos, Capital
Interest on beg. capital
Balance 3:1
Net Profit
2.

Bernabe:
Jan. 1 May 31
June 1 Oct. 31
Nov, 1 Dec. 31

Total
P 64,000
636,000
P700 000
700,000
284,000
416,000

Bernabe
P 140,000
48,000
96,000
P 284,000

Burgos
260,000
60,000
96,000
P 416,000
P

Total
P400,000
P108,000
96,000
P700 000
700,000
394,150
305,850

Bernabe
P 90,000
49,000
255,150
P 394,150
P360,000 x 5
460,000 x 5
400,000 x 2

Burgos:
Jan. 1 June 30

P440,000 x 6

July 1 Oct. 31
Nov.1 Dec. 31

360,000 x 4
500,000 x 2

Burgos
170,000
50,800
85,050
P 305,850
P

Total
P260,000
99,800
340,200
P700 000

P1,800,00
0
2,300,000
800,000
P4,900,000/12

P408,333

P2,640,00
0
1,440,000
1,000,000
P5,080,000/12

P423,333

Income Summary
Bernabe, Capital
Burgos, Capital
Salaries
Interest on average. cap
Balance 40%, 60%
Net Profit

5.

Burgos
35,200
159,000
P 194,200
P

Income Summary
Bernabe, Capital
Burgos, Capital
Salaries
Interest on average. cap
Balance 3:1
Net Profit

4.

Bernabe
P 28,800
477,000
P 505,800

Income Summary
Bernabe, Capital
Burgos, Capital
Salaries
Interest on end capital
Balance Equally
Net Profit

3.

505,800
194,200

700,000
267,567
432,433
Bernabe
P 100,000
40,833
126,734
P 267,567

Burgos
200,000
42,333
190,100
P 432,433
P

Income Summary
Bernabe, Capital
Burgos, Capital

Total
P300,000
83,166
316,834
P700 000
700,000
329,360
370,640

Bernabe

Burgos

Total

AA 1 - Chapter 1 (2008 edition)

Salaries
Interest on beg. cap
Bonus
Balance 2:3
Net Profit
B = 10%(NI S I)

page 13

P 100,000
28,800
43,600
156,960
P 329,360

100,000
35,200
235,440
370,640

P220,000
64,000
43,600
392,400
P700 000

Problem 1 7
1.

2.

6% interest on capital
Salaries
Balance 5:3:2
Net Profit
6% interest on capital
Salaries
Balance 5:3:2
Net Profit

Sandy
P 16,800
( 74,500)
P(57,700)
P 16,800
( 32,000)
P( 15,200)

Tammy
P 12,000
48,000
( 44,700)
P 15,300

Manny
P 7,200
40,000
( 29,800)
P 17,400

Total
P 36,000
88,000
(149,000)
P(25,000)

P 12,000
48,000
( 19,200)
P 40,800

7,200
40,000
( 12,800)
P 34,400

P 36,000
88,000
( 64,000)
P 60,000

P 36,000
88,000
13,500
112,500
P250,000

3.

6% interest on capital
P 16,800
P 12,000
Salaries
48,000
Bonus
13,500
Balance 5:3:2
56,250
33,750
Net Profit
P 73,050
P107,250
B = (P250,000 P36,000 P88,000 P72,000)25% = P13,500

7,200
40,000

22,500
P 69,700

Problem 1 - 8
1.
5% interest on capital
Salaries
20% bonus on net profit
Balance capital ratio
Net Profit
2.

Delmar
P 2,500
12,000
22,100
40,250
P76,850

Pilar
P 1,500
8,000
24,150
P33,650

Sales
Cost of Goods Sold
Operating Expenses
Income Taxes
Income Summary

480,000

Income Summary
Delmar, Capital
Pilar, Capital

110,500

Delmar, Capital
Pilar, Capital
Delmar, Drawing
Pilar, Drawing

6,000
10,000

Total
4,000
20,000
22,100
64,400
P110,500
P

210,000
100,000
59,500
110,500
76,850
33,650

6,000
10,000
Delmar and Pilar Company

AA 1 - Chapter 1 (2008 edition)

page 14

Statement of Changes in Partners Capital


For the Year Ended December 31, 2008
Capital balances, January 1, 2008
Add Distribution of net income for 2008:
Interests
Salaries
Bonus
Balance - capital ratio
Total share in net profit
Total
Less Drawings
Capital balances, December 31, 2008

Delmar
P 50,000

Pilar
P30,000

Total
P 80,000

2,500
12,000
22,100
40,250
P 76,850

P 1,500
8,000

24,150
P33,650

4,000
20,000
22,100
64,400
P110,500

P126,850
6,000
P120,850

P63,650
10,000
P53,650

P190,500
16,000
P174,500

Problem 1 - 9
Ramos, Gonzales and Martinez
Statement of Changes in Partners Capital
For Three Years Ended December 31, 2008
Capital, January 1, 2006
Distribution of net loss (Sch. 1)
Withdrawals
Capital, December 31, 2006
Distribution of net profit (Sch. 2)
Withdrawals
Capital, December 31, 2007
Distribution of net profit (Sch. 3)
Withdrawals
Capital, December 31, 2008

Ramos
P 80,000
( 2,000)
(12,000)
P 66,000
7,960
(13,960)
P 60,000
21,840
(20,400)
P 61,440

Gonzales
P 48,000
( 1,520)
(14,480)
P 32,000
8,320
(16,320)
P 24,000
18,840
(24,000)
P 18,840

Martinez
P 40,000
( 2,000)
(16,000)
P 22,000
7,720
(17,720)
P12,000
18,120
(21,200)
P 8,920

Total
P 168,000
( 5,520)
(42,480)
P120,000
24,000
(48,000)
P 96,000
58,800
(65,600)
P 89,200

Gonzales
P 12,000
2,880
(16,400)
P( 1,520)

Martinez
P 12,000
2,400
(16,400)
P( 2,000)

Total
P 33,600
10,080
P 49,200
P( 5,520)

Gonzales

Martinez

Total

Schedule 1 - Distribution of 2006 net loss


Salaries to partners
Interest of 6% on beg. Capital
Balance equally
Net income

Ramos
P 9,600
4,800
(16,400)
P( 2,000)

Schedule 2 - Distribution of 2007 net profit


Ramos

AA 1 - Chapter 1 (2008 edition)

page 15

Salaries to partners
Interest of 6% on beg. Capital
Balance equally
Net income

P 9,600
3,960
( 5,600)
P 7,960

P 12,000
1,920
( 5,600)
P 8,320

P 12,000
1,320
( 5,600)
P 7,720

P 33,600
7,200
(16,800)
P 24,000

Gonzales
P 12,000
1,440

Martinez
P 12,000
720

5,400
18,840

5,400
18,120

Total
P 33,600
5,760
3,240
16,200
58,800

Schedule 3 - Distribution of 2008 net profit


Salaries to partners
Interest of 6% on beg. Capital
Bonus - 20% (P58,800 - P39,360 - B)
Balance equally
Net income

Ramos
P 9,600
3,600
3,240
5,400
21,840

Problem 1 -10
Robles, Bernal and Reyes
Statement of Partners Capital
For the Year Ended December 31, 2008
Robles

Berna

Reyes

Total

l
Capital balances before closing
the nominal accounts
Add Distribution of net profit:
Drawing allowance
Interest on average capital
Balance - 60%, 30%, 10%
Total
Deduct Cash distribution
Capital, December 31, 2008

P120,000

P ( 2,000)

P20,000

P138,000

20,000
7,200
58,800
P206,000
122,720
P 83,280

14,000
240
29,400
P41,640

10,000
560
9,800
P40,360
26,480
P13,880

44,000
8,000
98,000
P288,000
149,200
P138,800

P41,640

P206,000 / 60% = P343,333;


P40,360 / 10% = P403,600
P41,640 / 30% = P138,800 (required total capital)
Problem 1 - 11
Chavez, Roman, and Valdez
Statement of Changes in Partners Capital
January 1 to November 1, 2008
Chavez
Loan
Beginning balances
Loan from Chavez
Transfer of equipment to Valdez
Balances
Distribution of loss on realization*
Salary to Valdez

Chavez
Capital
P 80,000

Roman
Capital
P 80,000

Valdez
Capital
P 80,000

P 80,000

P 80,000

( 16,000)
P 64,000

P 60,000
P 60,000

24,000

Total
P240,000
60,000
( 16,000)
P284,000
24,000

AA 1 - Chapter 1 (2008 edition)

Int. to Chavez for 7 months


Balance divided equally*
Balances
Dist. of cash in final settlement

page 16

P 60,000
60,000

2,100
( 76,700)
P 5,400
5,400

*Total partners equity as shown above


Less Cash available for distribution
Loss on realization
Less Salary and interest
Total loss to be divided equally

( 76,700)
P 3,300
3,300

( 76,700)
P 11,300
11,300

2,100
( 230,100)
P 80,000
80,000

P284,000
80,000
P204,000
26,100
P230,100

Problem 1 - 12
Canlas, David, Estrella and Fajardo
Statement of Changes in Partners Capital Accounts
For the Year Ended December 31, 2008
Investment
Net profit
Total
Less: Excess rent (P225 x 6)
Withdrawals
Uncollectible accounts
Capital, December 31

Canlas
P309,000
237,700
P546,700

David
P159,000
186,230
P345,230

P 78,000
18,000
P 96,000
P450,700

P 66,000
6,750
P 72,750
P272,480

Estrella
P327,000
140,310
P467,310
P 13,500
87,000

Fajardo
------P 24,010
P 24,010

P100,500
P366,810

P 37,500
P(13,490)

Total
P 795,000
588,250
P1,383,250
P 13,500
268,500
24,750
P 306,750
P1,076,500

P 37,500

Supporting computations:
Revenue from fees
Expenses:
Total expenses, excluding depreciation and uncollectible
accounts (P290,000 - P13,500)
Depreciation [(P195,000 x 10%) + (P75,000 x 5%)
Doubtful accounts (P24,000 x 50%)
Net profit

P 900,000
P 276,500
23,250
12,000

311,750
P588,250

Distribution of net income


Canlas
20% of gross fees from respective
clients
20% of fees after April 1 after
expenses but before bad debts
Balance -Canlas-40%, David-35%,
Estrella-25%
Total

P 66,000

171,700
P237,700

David
P 36,000

150,230
P186,230

Estrella

Fajardo

P 33,000

107,310
P140,310

Total
P135,000

P24,010*

24,010

P24,010

429,240
P588,250

AA 1 - Chapter 1 (2008 edition)

page 17

Revenues
Expenses before uncollectible accounts (P276,500 + P23,250) x 180 / 900
Share of Fajardo

After April 1
P 180,000
59,950
P120,050
20%
P 24,010

Problem 1-13
1.

2.

3.

Equipment
Accumulated Depreciation
Profit and Loss

13,500
1,350
12,150

Profit and Loss


Interest Payable
P87,500 x 6% x 10/12 = P4,375

4,375

Profit and Loss


Abaya, Capital
Reyes, Capital

159,025
63,700
95,505

Salaries
Bonus [25% x (NI B S) ]
Balance equally
Total
4.

4,375

Abaya
P 39,000
24,610
P 63,610

Reyes
P 58,500
12,305
24,610
P 95,415

Abaya, Capital
Reyes, Capital
Abaya, Drawing
Reyes, Drawing

Total
P 97,500
12,305
49,220
P159,025
36,000
62,500
36,000
62,500

Problem 1-14

1.

Jaime = 5/10 x 80% = 40%


Madrid = 3/10 x 80% = 24%

2.

Corrected net income = P250,000 (P12,000 P31,000 P20,000 + P15,000 + P9,000 x


65%) = P240,250
Jaime = P240,250 x 40% = P96,100
Madrid = P240,250 x 24% = P57,660

Soriano = 2/10 x 80% = 16%


Matias = 20%

Soriano = P240,250 x 16% = P38,440


Matias = P240,250 x 20% = P48,050

MULTIPLE CHOICE
1.
2.
3.
4.

D
D
A
C
Abena MV Cost (P90,000 P60,000)

Total
P30,000

Abena
(60%)
P18,000

Buendia
(40%)
P12,000

AA 1 - Chapter 1 (2008 edition)

Buendia MV Cost (P60,000 P70,000)


Actual
Inequity
5.
6.
7.
8.

A
C
B
B

page 18

( 10,000)
P20,000
( 20,000)
P 0

( 6,000)
P12,000
( 30,000)
(P18,000)

Molinas contribution (P190,000 P60,000)


Nuevos tangible contribution
Total capital contributions

( 4,000)
P 8,000
10,000
P18,000

P130,000
100,000
P230,000
x 60%
P 138,000
130,000
P
8,000

Capital credit of Molina


Contribution of Molina
Bonus to Molina
9.

Roxas = P596,250 - P5,550 = P590,700


Bernardo = P335,000 - P4,050 - P9,000 = P321,950

10.

Roxas = (P590,700 + P321,950) x 60% = P547,590


Bernardo = (P590,700 + P321,950) x 40% = P365,060

11.

Roxas = P650,000 P590,700 = P59,300


Bernardo = P400,000 P321,950 = P78,050

12.

Bruno = P150,000 - P90,000 = P60,000

13.

Total assets = Total liab. + Total capital


= P25,000 + P300,000 = P325,000

14.

Cash contribution = (P248,850 x 1/3) P50,000 = P32,950

15

Total capital = (P158,400 + P17,500 P5,000 P5,000) 2/3 = P248,850

16.

Required capital of Esteban (P287,500 x 60%)


Non-cash contributions of Esteban (P125,000 P30,000)
Cash contribution

P172,500
95,000
P 77,500

17.

Contribution of Diaz
Contribution of Esteban (P125,000 P30,000 + P50,000)
Total partnership capital

P115,000
145,000
P260,000

18.

P115,000 + P95,000 = P210,000/2

P105,000

19.

Net increase (decrease) in capital


Add Withdrawals
Total
Less Additional investments
Profit share
Profit share percentage
Total partnership net profit

(P120,000)
260,000
(P140,000)
50,000
P 90,000
30%
P300,000

AA 1 - Chapter 1 (2008 edition)

20.
21.
22.

C
B
C

23.
24.

page 19

Net profit (exclusive of salary, interest and bonus)


Salary (P2,000 x 12)
Interest (P50,000 x 5%)
Net profit after deduction of bonus
Bonus = .20 (P120,000 + Bonus) = P24,000 + .20 Bonus
= P24,000/.80 = P30,000
C
10% x P1,000,000
20% x P1,500,000
5% (P1M P400,000)
Balance equally
Net income

25.

A
Interest
Salaries
Balance equally

26.

Bustos

Cancio

P30,000
680,000

P30,000
680,000

Campos
P12,000
40,000
(70,000)
Torres

Ocampo
P 8,000
( 70,000)

6,800
Torres

(1,200)
Torres

12,000
3,400
P19,400

1,000
22,000
17,000
P44,000

Velasco
P 2,000

Total
P 2,000

12,000
(600)
P13,400

1,000
22,000
(3,000)
P22,000

Velasco
P 2,000

Total
P 2,000

10,364
P12,364

1,000
19,000
P22,000

P 1,000
P8,636

Average capital of Tamayo


P100,000 x 6 = P 600,000
160,000 x 6 = 960,000
P1,560,000/12
P130,000

Total
P 44,000
100,000
( 210,000)
Total
P 4,000

P 1,000
P10,000
(1,200)

Total
P 100,000
300,000
60,000
2,040,000

Velasco
P 4,000

P 1,000
P10,000
6,800

Sison
Bonus - 10%(P22,000 - B)
Interest on capital
in excess of P100,000
Balance Salary ratio

29.

Ramos
P24,000
60,000
( 70,000)
P14,000

Sison
Bonus - 10%(P22,000 - B)
Interest on capital
in excess of P100,000
Salaries to partners
Balance - 4:4:2

28.

680,000
P1,080,000

Sison
Bonus - 10%(P44,000 - B)
Interest on capital
in excess of P100,000
Salaries to partners
Balance - 4:4:2

27.

Alberto
P 100,000
300,000

P 93,500
24,000
2,500
P120,000

Average capital of Vidal


P225,000 x 9 = P2,025,000
155,000 x 3 =
465,000
P2,490,000/12
P207,500

AA 1 - Chapter 1 (2008 edition)

page 20

Average capital of Banson - P150,000


Total int. on ave. capital= (P130,000 + P207,500 + P150,000) 10%
= P48,750
30.

Interest on ave. capital


Salaries to partners
Balance - divided equally

31.

Total capital before net income


(P475,000 + P60,000 P70,000)
Add Net profit
Total capital, Dec. 31, 2008

32.

D
Int. on average capital
Salaries to partners
Balance - equally
Net increase (decrease)

33.

P 48,750
144,000
9,000
P 201,750

Andal
P 47,250
122,325
(139,308)
P 30,267

35.
36.
37.

D
A
A

38.

Briones
P 23,865
(139,308)
P(115,443)

Camba
P 16,235
82,625
(139,308)
P( 40,448)

Net income = Net sales - CGS - Depr. - Oper. exp. Others)


= P228,000 - P123,000 - P7,500 - P58,100 x
65%
Mariano
P10,000
1,561
8,781
P 20,342

Salary to partner for 10 mos.


Bonus to managing partner
Balance based on orig. cap.
TOTAL share in profit
34.

P465,000
201,750
P666,750

TOTAL share in profit


Add Capital, beginning
TOTAL
Less Withdrawals
Capital, end
Belen
Interest
Salaries
Balance
Addl profit
for Edna
Net profit

B
Salaries
Bonus
Interest
Balance
Total

P 20,342
125,000
P145,342
20,000
P125,342

P25,610

Lucas

total
P 10,000
1,561
14,049
P 25,610

P 5,268
P 5,268
P 5,268
75,000
P 80,268
30,000
P 50,268

Total
P 87,350
204,950
(417,924)
P(125,624)

P 25,610
200,000
P 225,610
50,000
P 175,610

Lorna

Ursula

P 5,000.00
10,000.00
10,000.00

P 2,500.00
6,000.00
10,000.00

P 2,500.00

P2,000.00

6,666.67

6,666.67

P12,000.00
16,000.00
33,333.34

________
P25,000.00

________
P18,500.00

_________
P9,166.67

3,333.33
P12,000.00

3,333.33
P64,666.67

Puno
P40,000
13,000
1,000
7,000
P61,000

Edna

Quirino
P36,000

Romero
P13,650

750
7,000
P43,750

4,600
7,000
P25,200

Total

Total
P 89,650
13,000
6,350
21,000
P130,000

AA 1 - Chapter 1 (2008 edition)

Computation of average capital:


Puno, capital
Jan. 1 P10,000 x 3
Apr 1 9,000 x 3
July 1 - 11,000 x 3
Oct. 1 - 10,000 x 3
Quirino, capital
Jan. 1 P 6,000 x 6
July 1 - 10,000 x 3
Oct. 1 - 8,000 x 3
Romero, capital
Jan. 1 P40,000 x 3
Apr. 1 - 38,000 x 3
July 1 - 53,000 x 6

page 21

P 30,000
27,000
33,000
30,000

P120,000 / 12

P10,000

P 36,000
30,000
24,000
P 90,000 / 12

P 7,500

P120,000
114,000
318,000
P552,00 / 12

P46,000

Let X = Net Income


P40,000 + 10% X + P1,000 + 1/3 (X P89,650 10% X P6,350 = P61,000
P40,000 + 10% X + P1,000 + 1/3 (90% X P96,000) = P61,000
P40,000 + 10% X + P1,000 + 30% X P32,000 = P61,000
10% X + 30% X = P61,000 P40,000 P1,000 + P32,000
40% X = P52,000
X = P130,000
39.

Legarda- 5/10 x 80% = 40%


Madrigal-3/10 x 80% = 24%

Sotto - 2/10 x 80% = 16%


Pimentel 20%

40.

Share of Legarda = P25,000 ( P1,200 - P3,100 - P2,000 + P1,500 + P


900 x 65%) = P24,025 x 40% = P9,610

41.

Serrano
2008 Net income
(P50,000 P8,000)
Salary to Serrano
Remainder
Divided equally

P42,000
( 36,000)
P 6,000
( 6,000)

Understatement in 2007 NI
Divided 60:40

P8,000
( 8,000)

Income allocation

Toledo

P36,000
3,000

P 3,000

4,800

3,200

P43,800

P 6,200