CHAPTER 1

Partnership Formation and Operations

EXERCISES
Exercise 1 1

Req. 1.
a. Campos, Capital 14,000
Allowance for Uncollectible Accounts 14,000

Accumulated Depreciation 6,000

Campos, Capital 6,500
Furniture and Fixtures 12,500

Goodwill 30,000
Campos, Capital 30,000

b. Cash (P83,500 x 1/2) 41,750

Tomas, Capital 41,750
To record contributions of Tomas

Req. 2.
Accounts Receivable 60,000
Inventory 100,000
Furniture and Fixtures 7,500
Goodwill 30,000
Allowance for Uncollectible Accounts 24,000
Accounts Payable 90,000
Campos, Capital 83,500

Cash 41,750
Tomas, Capital 41,750

Req. 3.
Campos and Tomas Partnership
Statement of Financial Position
July 1, 2012

Assets Liabilities & Owners Equity

Cash P41,750 Accounts Payable P90,000
Accounts Recl P60,000 Campos, Capital 83,500
Less Allowance for Tomas, Capital 41,750
Uncol Accts. 24,000 36,000
Inventory 100,000
Furniture 7,500
Goodwill 30,000 ________
TOTAL LIABILITIES &
TOTAL ASSETS P215.250 OWNERS EQUITY P215,250
AA 1 - Chapter 1 (2012 edition) page 2

Exercise 1-2

1. Cash 90,000
Accounts Receivable 36,000
Merchandise Inventory 54,000
Equipment 25,000
Allowance for Uncollectible Accounts 2,000
Accounts Payable 21,000
Notes Payable 18,000
Bernal, Capital 164,000

2. Cash 246,000
Camino,Capital(164,000/40%=410,000x60%=246,000) 246,000

Exercise 1 3

1. Cash 800,000
Land 540,000
Building 900,000
Legaspi, Capital 800,000
Sabino, Capital 1,440,000

2. Cash 800,000
Land 540,000
Building 900,000
Legaspi, Capital(2,240,000x40%) 896,000
Sabino, Capital(2,240,000x60%) 1,344,000

Exercise 1 - 4

1. Income Summary 238,000

Santos, Capital (P238,000 x 260/425) 145,600
Abad, Capital (P238,000 x 165/425) 92,400

2. Income Summary 238,000

Santos, Capital (P238,000 x 3,125/5,000) 148,750
Abad, Capital (P238,000 x 1,875/5,000) 89,250
Santos:
Jan. 1 Mar. 31 P260,000 x 3 P780,000
Apr. 1 Apr. 30 290,000 x 1 290,000
May 1 July 31 360,000 x 3 1,080,000
Aug. 1 Dec. 31 320,000 x 5 1,600,000
P3,750,000/12 P312,500

Abad:
Jan. 1 May 31 P165,000 x 5 P825,000
June 1 Aug. 31 215,000 x 3 645,000
Sept.1 Dec. 31 195,000 x 4 780,000
P2,250,000/12 P187,500

3. Income Summary 238,000

AA 1 - Chapter 1 (2012 edition) page 3

Santos, Capital 147,750

Abad, Capital 90,250
Santos Abad Total
Interest on ave. capital P 18,750 P 11,250 P 30,000
Salaries to partners 150,000 100,000 250,000
Balance - equally ( 21,000) ( 21,000) (42,000)
Net Profit P 147,750 P 90,250 P238 000

4. Income Summary 238,000

Santos, Capital 164,840
Abad, Capital 73,160
Santos Abad Total
Bonus to Santos
25% (P238,000 - B) P 47,600 P 47,600
Interest of 6% on excess
average investment
6% (P312,500 - P187,500) 7,500 7,500
Balance - 3:2 109,740 73,160 182,900
Net Profit P 164,840 P73,160 P238,000

5. Income Summary 238,000

Santos, Capital (P238,000 x 15/25) 142,800
Abad, Capital (P238,000 x 10/25) 95,200

Exercise 1 5
Sanchez and Gomez
Schedule of Distribution of Net Profit
December 31, 2012
Sanchez Gomez Total
6% interest on average capital P 6,246 P 14.440 P 20,686
10% bonus on net profit after interest 9,131 9,131
Salaries 20,000 30,000 50,000
Balance 70%, 30% 22,528 9,655 32,183
Net Profit P57,905 P54,095 P112,000

Computation of average capital:

Sanchez, Capital Gomez, Capital
Jan. 1 P81,600 x 3 P 244,800 Jan. 1 P224,000 x 7 P1,568,000
Apr. 1 P111,600 x 9 1,004,400 Aug. 1 P264,000 x 5 1,320,000
P1,249,200 P2,888,000

Ave. capital (P1,249,200/12) P104,100 Ave. capital (P2,888,000/12) P240,667

Computation of bonus: P160,000 x 70%= P112,000 P20,686 x 10% = P9,131

AA 1 - Chapter 1 (2012 edition) page 4

2.
Sanchez and Gomez
Statement of Partners Capital
For the Year Ended December 31, 2012

Sanchez Gomez Total

Capital, January 1 P 81,600 P224,000 P305,600
Additional investment 30,000 40,000 70,000
Net profit 57,905 54,095 112,000
Drawings ( 41,600) ( 41,600) ( 83,200)
Capital, December 31 P127,905 P276,495 P404,400

3. Sanchez Gomez Total

6% interest on average capital P 6,246 P14.440 P 20,686
10% bonus on net profit after interest 9,131 9,131
Balance Salary ratio 37,356 44,827 82,183
Net Profit P52,733 P59,267 P112,000

Exercise 1-6

1. Mercado Puzon Total

8% interest on beg capital P 48,000 P 54.000 P102,000
Salaries 225,000 112,500 337,500
Balance 3:2 ( 38,700) ( 25,800) ( 64,500)
Net Profit P234,300 P140,700 P375,000

2. Mercado Puzon Total

8% interest on beg capital P 48,000 P 54.000 P102,000
Balance Salary ratio 182,000 91,000 273,000
Net Profit P230,000 P145,000 P375,000

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 P374,000

Interest P200,000 x 10% P20,000
Salary P8,000 x 12 96,000 116,000
Net profit before interest and salary P490,000
Bonus rate x 20%
Amount of bonus to Lirio P 98,000

Exercise 1 8
1. B = .25 x P500,000 = P125,000

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

1.25
3. B = .25 (P500,000 - Tax)
AA 1 - Chapter 1 (2012 edition) page 5

T = .30 x P500,000 = P150,000

B = .25 (P500,000 P150,000)
B = P 87,500

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

B = .25 (P500,000 - B - P150,000)
B = P87,500 - .25B
B = P87,500/1.25
B = P70,000

Exercise 1 - 9

1.
Estrella Felipe Garcia Jimenez Total
Salary P40,000 P20,000 P 60,000
Bonus 6,000 4,000 10,000*
Interest 10,000 9,000 P 4,000 P 9,400 32,400
Balance 26,900 26,900 26,900 26,900 107,600
Total P82,900 P59,900 P30,900 P36,300 P210,000
*B = 5% (P210,000 B) = P10,000
2.
Estrella Felipe Garcia Jimenez Total
Salary P40,000 P20,000 P 60,000
Interest 10,000 9,000 P 4,000 P 9,400 32,400
Balance ( 43,100) ( 43,100) ( 43,100) ( 43,100) (172,400)
Total P 6,900 (P 14,100) (P39,100) (P33,700) (P 80,000)

3.
Estrella Felipe Garcia Jimenez Total
Interest P10,000 P 9,000 P 4,000 P 9,400 P 32,400
Bonus 6,000 4,000 10,000
Salary 25,067 12,533 _______ ________ 37,600*
Total P41,067 P25,533 P 4,000 P 9,400 P 80,000
*P37,600 x 4/ 6 = P25,067; P37,600 x 2/ 6 = P12,533

Exercise 1-10

1. Fees Earned 750,000

Joseph, Capital 50,000
Luis, Capital 200,000
Operating Expenses 100,000
Income Summary 500,000

2. Income Summary 500,000

Joseph Capital 150,000
Luis, Capital 250,000
Nicolas, Capital 100,000
AA 1 - Chapter 1 (2012 edition) page 6

Exercise 1 11

1.
Benito Cabral Duenas Total
Capital balances before payment
of cash P120,000 P100,000 P100,000 P320,000
Required capital balances based on
on profit and loss ratio 128,000 112,000 80,000 320,000
Cash received (paid) (P 8,000) (P 12,000) P 20,000 -

Journal entry on the partnership books

Duenas, Capital 20,000

Benito, Capital 8,000
Cabral, Capital 12,000

2.
Benito Cabral Duenas Total
Capital balances before additional
cash investment P120,000 P100,000 P100,000 P320,000
Required capital balances based on
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 80,000
Benito, Capital 40,000
Cabral, Capital 40,000

3.
Benito Cabral Duenas Total
Capital balances P120,000 P100,000 P100,000 P320,000
Required capital 120,000 105,000 75,000 300,000
Additional investment(withdrawals) -------- 5,000 (P 25,000) P 20,000

Duenas, Capital 25,000

Cash 20,000
Cabral, Capital 5,000
AA 1 - Chapter 1 (2012 edition) page 7

Exercise 1 12
Enriquez and Flores
Schedule Showing Adjustments in Capital
For the Year Ended December 31, 2012

Reported net profit P400,000

Adjustments:
Equipment purchased charged to expense P200,000
Depreciation on equipment ( 20,000)
Overstatement of 2012 ending inventory ( 24,000)
P156,000
x 70% 109,200
Corrected net profit P509,200

Distribution of 2012 net profit

Enriquez Flores Total
Salaries P120,000 P120,000 P240,000
Interest 30,000 45,000 75,000
Balance 51,000 34,000 85,000
P201,000 P199,000 P400,000

Distribution of 2012 corrected net profit

Salaries P120,000 P120,000 P240,000
Interest 30,000 45,000 75,000
Balance 116,520 77,680 194,200
P266,520 P242,680 P509,200
Adjustments P 65,520 P 43,680 P109,200

2. Equipment 200,000
Enriquez, Capital 65,520
Flores, Capital 43,680
Accumulated Depreciation 20,000
Inventory 24,000
Income Tax Payable 46,800

PROBLEMS
Problem 1 1

1. a. Merchandise, Inventory 60,000

Ruiz, Capital 60,000

b. Ruiz, Capital 30,000

Allowance for Uncollectible Accounts 30,000

c. Interest Receivable 1,500

Ruiz, Capital 1,500
P150,000 x 6% x 2/12 = P1,500
AA 1 - Chapter 1 (2012 edition) page 8

d. Ruiz, Capital 7,500

Interest Payable 7,500
P300,000 x 10% x 3/12 = P7,500
(date of note is Sept. 1, 2012)
e. Accumulated Depreciation 180,000
Ruiz, Capital 60,000
Furniture and Fixtures 240,000
f. Office Supplies 5,000
Ruiz, Capital 5,000

g. Cash 1,573,500
Santos, Capital 1,573,500

Ruiz and Santos

Statement of Financial Position
December 1, 2012

Assets
Cash P 1,813,500
Notes Receivable 150,000
Accounts Receivable P900,000
Less Allowance for Uncollectible Accounts 90,000 810,000
Interest Receivable 1,500
Merchandise Inventory 300,000
Office Supplies 5,000
Furniture and Fixtures 480,000
Total Assets P3,560,000
Liabilities and Capital
Notes Payable P300,000
Accounts Payable 630,000
Interest Payable 7,500
Total Liabilities P 937,500
Ruiz, Capital P1,049,000
Santos, Capital 1,573,500
Total Capital 2,622,500
Total Liabilities and Capital P3,560,000

Problem 1-2

1. Cash 518,000
Merchandise Inventory 1,152,000
Tomas, Capital 1,670,000

Cash 198,000
Accounts Receivable 1,792,000
Merchandise Inventory 256,000
Office Equipment 160,000
Allowance for Uncollectible Accounts 160,000
Accounts Payable 576,000
Vicente, Capital 1,670,000
AA 1 - Chapter 1 (2012 edition) page 9

2. Vicente, Capital 83,200

Allowance for Uncollectible Accounts 83,200

Merchandise Inventory 64,000

Vicente, Capital 64,000
Vicente, Capital 96,000
Office Equipment 96,000

Cash 198,000
Vicente, Capital 198,000

Cash 518,000
Merchandise Inventory 1,152,000
Tomas , Capital 1,670,000

3. Tomas and Vicente

Statement of Financial Position
June 1, 2012
Assets
Cash P 716,000
Accounts Receivable P1,792,000
Less Allowance for Uncollectible Accounts 160,000 1,632,000
Inventories 1,408,000
Office Equipment 160,000
Total Assets P3,916,000
Liabilities and Capital
Accounts Payable P 576,000
Tomas, Capital P1,670,000
Vicente, Capital 1,670,000 3,340,000
Total Liabilities and Capital P3,916,000

Problem 1 3

1. Merchandise Inventory 3,000

Goodwill 3,000
Accumulated Depreciation 900
Allowance for Uncollectible Accounts 1,000
Equipment 2,000
Rosas, Capital 3,900

Cash 5,000
Accounts Receivable 46,000
Merchandise Inventory 108,000
Equipment 12,000
Furniture and Fixtures 9,000
Goodwill 3,000
Allowance for Uncollectible Accounts 4,000
Accounts Payable 54,000
Perlas, Capital 125,000
AA 1 - Chapter 1 (2012 edition) page 10

2. Cash 5,000
Accounts Receivable 46,000
Merchandise Inventory 108,000
Equipment 12,000
Furniture and Fixtures 9,000
Goodwill 3,000
Allowance for Uncollectible Accounts 4,000
Accounts Payable 54,000
Perlas, Capital 125,000

Cash 7,000
Accounts Receivable 49,000
Merchandise Inventory 75,000
Equipment 7,000
Goodwill 3,000
Allowance for Uncollectible Accounts 5,000
Accounts Payable 36,000
Rosas, Capital 100,000

Problem 1 4

1. Cash 900,000
Inventories 1,500,000
Equipment 3,000,000
Notes Payable 1,050,000
Serrano, Capital 4,350,000
Cash 600,000
Land 6,000,000
Mortgage Payable 1,950,000
Torres, Capital 4,650,000

Torres, Capital 150,000

Serrano, Capital 150,000

Purchases 900,000
Accounts Payable 900,000

Accounts Payable 720,000

Cash 720,000

Mortgage Payable 300,000

Interest Expense 120,000
Cash 420,000

Notes Payable 225,000

Interest Expense 75,000
Cash 300,000

Accounts Receivable 3,450,000

Sales 3,450,000
AA 1 - Chapter 1 (2012 edition) page 11

Cash 3,150,000
Accounts Receivable 3,150,000

Selling and General Expenses 870,000

Cash 630,000
Accumulated Depreciation 150,000
Accrued expenses 90,000

Serrano, Drawing 351,000

Torres, Drawing 351,000
Cash 702,000

Income Tax 175,500

Income Tax Payable 175,500

Inventories, end 600,000

Sales 3,450,000
Inventories, beginning 1,500,000
Purchases 900,000
Selling and General Expenses 870,000
Interest Expense 195,000
Income Tax 175,500
Income Summary 409,500

Income Summary 409,500

Serrano, Capital 209,700
Torres, Capital 199,800

Serrano Torres Total

Interest on beginning capital P180,000 P180,000 P360,000
Salaries 150,000 100,000 250,000
Remainder 60%, 40% ( 120,300) ( 80,200) ( 200,500)
Net Profit P209,700 P199,800 P409,500

Serrano, Capital 351,000

Torres, Capital 351,000
Serrano, Drawing 351,000
Torres, Drawing 351,000
AA 1 - Chapter 1 (2012 edition) page 12

Serrano and Torres Partnership

Income Statement
For the Year Ended December 31, 2012

Sales P3,450,000
Cost of Goods Sold:
Inventories, beginning P1,500,000
Purchases 900,000
Cost of Goods Available for Sale P2,400,000
Less Inventories, end 600,000 1,800,000
Gross Profit P1,650,000
Selling and General Expenses 870,000
Operating Income P 780,000
Interest Expense 195,000
Net Profit before Income Tax P 585,000
Income Tax 175,500
Net Profit P 409,500
Serrano and Torres Partnership
Statement of Financial Position
December 31, 2012

Assets
Current Assets:
Cash P1,878,000
Accounts Receivable (P3,450,000 P3,150,000) 300,000
Inventories 600,000 P 2,778,000
Property, Plant and Equipment:
Land P6,000,000
Equipment P3,000,000
Less Accumulated Depreciation 150,000 2,850,000 8,850,000
Total Assets P11,628,000

Liabilities
Current Liabilities:
Accounts Payable (P900,000 P720,000) P180,000
Accrued Expenses 90,000
Income Tax Payable 175,500 P 455,500
Long-term Liabilities:
Notes Payable (P1,050,000 P225,000) P 825,000
Mortgage Payable (P1,950,000 P300,000) 1,650,000 2,475,000
Total Liabilities P 2,920,500

Capital
Serrano, Capital P4,358,700
Torres, Capital 4,348,800
Total Capital 8,707,500
Total Liabilities and Capital P11,628,000
AA 1 - Chapter 1 (2012 edition) page 13

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
3. P2,080,000. (P2,500,000 + P2,700,000)x 40% = P2,080,000

Problem 1 6

1. Income Summary 700,000

Bernabe, Capital 558,800
Burgos, Capital 141,200

Bernabe Burgos Total

Interest on beg. capital P 28,800 P 35,200 P 64,000
Balance 5:1 530,000 106,000 636,000
Net Profit P 558,800 P 141,200 P700 000

2. Income Summary 700,000

Bernabe, Capital 236,000
Burgos, Capital 464,000
Bernabe Burgos Total
Salaries P 140,000 P 260,000 P400,000
Interest on end capital 48,000 60,000 P108,000
Balance 25%,75% 48,000 144,000 192,000
Net Profit P 236,000 P 464,000 P700 000

3. Income Summary 700,000

Bernabe, Capital 252,400
Burgos, Capital 447,600
Bernabe Burgos Total
Salaries P 90,000 P 170,000 P260,000
Interest on average. cap 49,000 50,800 99,800
Balance 1/3;2/3 113,400 226,800 340,200
Net Profit P 252,400 P 447,600 P700 000

Bernabe:
Jan. 1 May 31 P360,000 x 5 P1,800,000
June 1 Oct. 31 460,000 x 5 2,300,000
Nov, 1 Dec. 31 400,000 x 2 800,000
P4,900,000/12 P408,333

Burgos:
Jan. 1 June 30 P440,000 x 6 P2,640,000
July 1 Oct. 31 360,000 x 4 1,440,000
Nov.1 Dec. 31 500,000 x 2 1,000,000
P5,080,000/12 P423,333

4. Income Summary 700,000

Bernabe, Capital 299,250
Burgos, Capital 400,750
AA 1 - Chapter 1 (2012 edition) page 14

Bernabe Burgos Total

Salaries P 100,000 P 200,000 P300,000
Interest on average. cap 40,833 42,333 83,166
Balance Equally 158,417 158,417 316,834
Net Profit P 299,250 P 400,750 P700 000

5. Income Summary 700,000

Bernabe, Capital 329,360
Burgos, Capital 370,640
Bernabe Burgos Total
Salaries P 100,000 P 100,000 P220,000
Interest on beg. cap 28,800 35,200 64,000
Bonus 43,600 43,600
Balance 2:3 156,960 235,440 392,400
Net Profit P 329,360 P 370,640 P700 000
B = 10%(NI S I)

Problem 1 7
Sandy Tammy Manny Total
1. 6% interest on capital P 16,800 P 12,000 P 7,200 P 36,000
Salaries 48,000 40,000 88,000
Balance 5:3:2 ( 74,500) ( 44,700) ( 29,800) (149,000)
Net Profit P(57,700) P 15,300 P 17,400 P(25,000)

2. 6% interest on capital P 16,800 P 12,000 P 7,200 P 36,000

Salaries 48,000 40,000 88,000
Balance 5:3:2 5,000 3,000 2,000 10,000
Net Profit P 21,800 P 63,000 P 49,200 P134,000

3. 6% interest on capital P 16,800 P 12,000 P 7,200 P 36,000

Salaries 48,000 40,000 88,000
Bonus 13,500 13,500
Balance 5:3:2 56,250 33,750 22,500 112,500
Net Profit P 73,050 P107,250 P 69,700 P250,000
B = (P250,000 P36,000 P88,000 P72,000)25% = P13,500

Problem 1 - 8

1. Delmar Pilar Total

5% interest on capital P 2,500 P 1,500 P 4,000
Salaries 12,000 8,000 20,000
20% bonus on net profit 23,800 23,800
Balance capital ratio 44,500 26,700 71,200
Net Profit P82,800 P36,200 P119,000
AA 1 - Chapter 1 (2012 edition) page 15

2. Sales 480,000
Cost of Goods Sold 210,000
Operating Expenses 100,000
Income Taxes 51,000
Income Summary 119,000

Income Summary 119,000

Delmar, Capital 82,800
Pilar, Capital 36,200

Delmar, Capital 6,000

Pilar, Capital 10,000
Delmar, Drawing 6,000
Pilar, Drawing 10,000

Delmar and Pilar Company

Statement of Changes in Partners Capital
For the Year Ended December 31, 2012

Delmar Pilar Total

Capital balances, January 1, 2012 P 50,000 P30,000 P 80,000
Add Distribution of net income for 2012:
Interests P 2,500 P 1,500 P 4,000
Salaries 12,000 8,000 20,000
Bonus 23,800 23,800
Balance - capital ratio 44,500 26,700 71,200
Total share in net profit P 82,800 P36,200 P119,000
Total P132,800 P66,200 P199,000
Less Drawings 6,000 10,000 16,000
Capital balances, December 31, 2012 P126,800 P56,200 P183,000

Problem 1 - 9

Ramos, Gonzales and Martinez

Statement of Changes in Partners Capital
For Three Years Ended December 31, 2012

Ramos Gonzales Martinez Total

Capital, January 1, 2010 P 80,000 P 48,000 P 40,000 P 168,000
Distribution of net loss (Sch. 1) ( 2,000) ( 1,520) ( 2,000) ( 5,520)
Withdrawals (12,000) (14,480) (16,000) (42,480)
Capital, December 31, 2010 P 66,000 P 32,000 P 22,000 P120,000
Distribution of net profit (Sch. 2) 7,960 8,320 7,720 24,000
Withdrawals (13,960) (16,320) (17,720) (48,000)
Capital, December 31, 2011 P 60,000 P 24,000 P12,000 P 96,000
Distribution of net profit (Sch. 3) 21,840 18,840 18,120 58,800
Withdrawals (20,400) (24,000) (21,200) (65,600)
Capital, December 31, 2012 P 61,440 P 18,840 P 8,920 P 89,200
AA 1 - Chapter 1 (2012 edition) page 16

Schedule 1 - Distribution of 2010 net loss

Ramos Gonzales Martinez Total
Salaries to partners P 9,600 P 12,000 P 12,000 P 33,600
Interest of 6% on beg. Capital 4,800 2,880 2,400 10,080
Balance equally (16,400) (16,400) (16,400) P 49,200
Net income P( 2,000) P( 1,520) P( 2,000) P( 5,520)

Schedule 2 - Distribution of 2011 net profit

Ramos Gonzales Martinez Total
Salaries to partners P 9,600 P 12,000 P 12,000 P 33,600
Interest of 6% on beg. Capital 3,960 1,920 1,320 7,200
Balance equally ( 5,600) ( 5,600) ( 5,600) (16,800)
Net income P 7,960 P 8,320 P 7,720 P 24,000

Schedule 3 - Distribution of 2012 net profit

Ramos Gonzales Martinez Total
Salaries to partners P 9,600 P 12,000 P 12,000 P 33,600
Interest of 6% on beg. Capital 3,600 1,440 720 5,760
Bonus - 20% (P58,800 - P39,360 - B) 3,240 3,240
Balance equally 5,400 5,400 5,400 16,200
Net income 21,840 18,840 18,120 58,800

Problem 1 -10
Robles, Bernal and Reyes
Statement of Partners Capital
For the Year Ended December 31, 2012

Robles Bernal Reyes Total

Capital balances before closing
the nominal accounts P120,000 P ( 2,000) P20,000 P138,000
Add Distribution of net profit:
Drawing allowance 20,000 14,000 10,000 44,000
Interest on average capital 7,200 240 560 8,000
Balance - 60%, 30%, 10% 58,800 29,400 9,800 98,000
Total P206,000 P41,640 P40,360 P288,000
Deduct Cash distribution 122,720 26,480 149,200
Capital, December 31, 2012 P 83,280 P41,640 P13,880 P138,800

P206,000 / 60% = P343,333; P40,360 / 10% = P403,600

P41,640 / 30% = P138,800 (required total capital)
 AA 1 - Chapter 1 (2012 edition) page 17

Problem 1- 11

Chavez, Roman, and Valdez

Statement of Changes in Partners Capital
January 1 to November 1, 2012

Chavez Chavez Roman Valdez

Loan Capital Capital Capital Total
Beginning balances P 80,000 P 80,000 P 80,000 P240,000
Loan from Chavez P 60,000 60,000
Transfer of equipment to Valdez ( 16,000) ( 16,000)
Balances P 60,000 P 80,000 P 80,000 P 64,000 P284,000
Distribution of loss on realization*
Salary to Valdez 24,000 24,000
Int. to Chavez for 7 months 2,100 2,100
Balance divided equally* ( 76,700) ( 76,700) ( 76,700) ( 230,100)
Balances P 60,000 P 5,400 P 3,300 P 11,300 P 80,000
Dist. of cash in final settlement 60,000 5,400 3,300 11,300 80,000

*Total partners equity as shown above P284,000

Less Cash available for distribution 80,000
Loss on realization P204,000
Less Salary and interest 26,100
Total loss to be divided equally P230,100

Problem 1 - 12
Canlas, David, Estrella and Fajardo
Statement of Changes in Partners Capital Accounts
For the Year Ended December 31, 2012

Canlas David Estrella Fajardo Total

Investment P309,000 P159,000 P327,000 ------- P 795,000
Net profit 237,700 186,230 140,310 P 24,010 588,250
Total P546,700 P345,230 P467,310 P 24,010 P1,383,250
Less: Excess rent (P225 x 6) P 13,500 P 13,500
Withdrawals P 78,000 P 66,000 87,000 P 37,500 268,500
Uncollectible accounts 18,000 6,750 24,750
P 96,000 P 72,750 P100,500 P 37,500 P 306,750
Capital, December 31 P450,700 P272,480 P366,810 P(13,490) P1,076,500

Supporting computations:
Revenue from fees P 900,000
Expenses:
Total expenses, excluding depreciation and uncollectible
accounts (P290,000 - P13,500) P 276,500
Depreciation [(P195,000 x 10%) + (P75,000 x 5%) 23,250
Doubtful accounts (P24,000 x 50%) 12,000 311,750
Net profit P588,250
AA 1 - Chapter 1 (2012 edition) page 18

Distribution of net profit

Canlas David Estrella Fajardo Total
20% of gross fees from respective
clients P 66,000 P 36,000 P 33,000 P135,000
20% of fees after April 1 after
expenses but before bad debts P24,010* 24,010
Balance -Canlas-40%, David-35%,
Estrella-25% 171,700 150,230 107,310 429,240
Total P237,700 P186,230 P140,310 P24,010 P588,250

After April 1
Revenues P 180,000
Expenses before uncollectible accounts (P276,500 + P23,250) x 180 / 900 59,950
P120,050
20%
Share of Fajardo P 24,010

Problem 1-13
1. Equipment 13,500
Accumulated Depreciation 1,350
Profit and Loss 12,150

2. Profit and Loss 4,375

Interest Payable 4,375
P87,500 x 6% x 10/12 = P4,375

3. Profit and Loss 159,025

Abaya, Capital 63,700
Reyes, Capital 95,505
Abaya Reyes Total
Salaries P 39,000 P 58,500 P 97,500
Bonus [25% x (NI B S) ] 12,305 12,305
Balance equally 24,610 24,610 49,220
Total P 63,610 P 95,415 P159,025

4. Abaya, Capital 36,000

Reyes, Capital 62,500
Abaya, Drawing 36,000
Reyes, Drawing 62,500

Problem 1-14

1. Jaime = 5/10 x 80% = 40% Soriano = 2/10 x 80% = 16%

Madrid = 3/10 x 80% = 24% Matias = 20%

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

70%) = P239,500

Jaime = P239,500 x 40% = P95,800 Soriano = P239,500 x 16% = P38,320

Madrid = P239,500 x 24% = P57,480 Matias = P239,500 x 20% = P47,900
AA 1 - Chapter 1 (2012 edition) page 19

MULTIPLE CHOICE

1. D
2. D
3. A
4. C Abena Buendia
Total (60%) (40%)
Abena MV Cost (P90,000 P60,000) P30,000 P18,000 P12,000
Buendia MV Cost (P30,000 P40,000) ( 10,000) ( 6,000) ( 4,000)
Actual P20,000 P12,000 P 8,000
Inequity ( 20,000) ( 30,000) 10,000
P 0 (P18,000) P18,000

5. D
6. C
7. C
8. B Molinas contribution (P190,000 P60,000) P130,000
Nuevos tangible contribution 100,000
Total capital contributions P230,000
x 60%
Capital credit of Molina P 138,000
Contribution of Molina 130,000
Bonus to Molina P 8,000

9. C Roxas = P596,250 - P5,550 = P590,700

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

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

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

11. A Roxas = P650,000 P590,700 = P59,300

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

12. A Bruno = P150,000 - P90,000 = P60,000

13. D Total assets = Total liab. + Total capital

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

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

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

16. A Required capital of Esteban P172,500

(P115,000/40%=P287,500 x 60%)
Non-cash contributions of Esteban (P125,000 P30,000) 95,000
Cash contribution P 77,500

17. C Contribution of Diaz P115,000

Contribution of Esteban (P125,000 P30,000 + P50,000) 145,000
Total partnership capital P260,000
AA 1 - Chapter 1 (2012 edition) page 20

18. B P115,000 + P95,000 = P210,000/2 P105,000

19. A Net increase (decrease) in capital (P120,000)

Add Withdrawals 260,000
Total (P140,000)
Less Additional investments 50,000
Profit share P 90,000
Profit share percentage 30%
Total partnership net profit P300,000

20. C
21. B
22. C Net profit (exclusive of salary, interest and bonus) P 93,500
Salary (P2,000 x 12) 24,000
Interest (P50,000 x 5%) 2,500
Net profit after deduction of bonus P120,000
Bonus = .20 (P120,000 + Bonus) = P24,000 + .20 Bonus
= P24,000/.80 = P30,000

23. D
24. B Alberto Bustos Cancio Total
10% x P1,000,000 P 100,000 P 100,000
20% x P1,500,000 300,000 300,000
5% (P1M P400,000) P30,000 P30,000 60,000
Balance equally 680,000 680,000 680,000 2,040,000
Net income P1,080,000

25. A Ramos Campos Ocampo Total

Interest P24,000 P12,000 P 8,000 P 44,000
Salaries 60,000 40,000 100,000
Balance equally ( 70,000) (70,000) ( 70,000) ( 210,000)
P14,000 (P66,000)

26. C Sison Torres Velasco Total

Bonus - 10%(P44,000 - B) P 4,000 P 4,000
Interest on capital
in excess of P100,000 P 1,000 1,000
Salaries to partners P10,000 12,000 22,000
Balance - 4:4:2 6,800 6,800 3,400 17,000
P19,400 P44,000

27. B Sison Torres Velasco Total

Bonus - 10%(P22,000 - B) P 2,000 P 2,000
Interest on capital
in excess of P100,000 P 1,000 1,000
Salaries to partners P10,000 12,000 22,000
Balance - 4:4:2 (1,200) (1,200) (600) (3,000)
P13,400 P22,000
AA 1 - Chapter 1 (2012 edition) page 21

28. B Sison Torres Velasco Total

Bonus - 10%(P22,000 - B) P 2,000 P 2,000
Interest on capital
in excess of P100,000 P 1,000 1,000
Balance Salary ratio P8,636 10,364 19,000
P12,364 P22,000

29. A Average capital of Tamayo Average capital of Vidal

P100,000 x 6 = P 600,000 P225,000 x 9 = P2,025,000
160,000 x 6 = 960,000 155,000 x 3 = 465,000
P1,560,000/12 P2,490,000/12
P130,000 P207,500

Average capital of Banson - P150,000

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

= P48,750

30. B Interest on ave. capital P 48,750

Salaries to partners 144,000
Balance - divided equally 9,000
P 201,750

31. D Total capital before net income

(P475,000 + P60,000 P70,000) P465,000
Add Net profit 201,750
Total capital, Dec. 31, 2008 P666,750

32. D Andal Briones Camba Total

Int. on average capital P 47,250 P 23,865 P 16,235 P 87,350
Salaries to partners 122,325 82,625 204,950
Balance - equally (139,308) (139,308) (139,308) (417,924)
Net increase (decrease) P 30,267 P(115,443) P( 40,448) P(125,624)

33. D Net income = Net sales - CGS - Depr. - Oper. exp. Others)
= P228,000- P123,000- P7,500- P58,100*=P39,400 x 70% P27,580
*P60,000- P2,500- P950+ P1,550 = P58,100
**(P27,580 P10,000) x 10% = P1,758
Mariano Lucas total
Salary to partner for 10 mos. P10,000 P 10,000
Bonus to managing partner 1,758 1,758
Balance based on orig. cap. 9,889 P 5,933 15,822
TOTAL share in profit P 21,647 P 5,933 P 27,580

34. B TOTAL share in profit P 21,647 P 5,933 P 27,580

Add Capital, beginning 125,000 75,000 200,000
TOTAL P146,647 P 80,933 P 227,580
Less Withdrawals 20,000 30,000 50,000
Capital, end P126,647 P 50,933 P 177,580
AA 1 - Chapter 1 (2012 edition) page 22

35. A Belen Lorna Ursula Edna Total

36. C Interest P 5,000.00 P 2,500.00 P 2,500.00 P2,000.00 P12,000.00
37. B Salaries 10,000.00 6,000.00 16,000.00
Balance 10,000.00 10,000.00 6,666.67 6,666.67 33,333.34
Addl profit
for Edna ________ ________ _________ 3,333.33 3,333.33
Net profit P25,000.00 P18,500.00 P9,166.67 P12,000.00 P64,666.67

38. D Puno Quirino Romero Total

Salaries P40,000 P36,000 P13,650 P 89,650
Bonus 13,000 13,000
Interest 1,000 750 4,600 6,350
Balance 7,000 7,000 7,000 21,000
Total P61,000 P43,750 P25,200 P130,000

Computation of average capital:

Puno, capital
Jan. 1 P10,000 x 3 P 30,000
Apr 1 - 9,000 x 3 27,000
July 1 - 11,000 x 3 33,000
Oct. 1 - 10,000 x 3 30,000
P120,000 / 12 P10,000
Quirino, capital
Jan. 1 P 6,000 x 6 P 36,000
July 1 - 10,000 x 3 30,000
Oct. 1 - 8,000 x 3 24,000
P 90,000 / 12 P 7,500

Romero, capital
Jan. 1 P40,000 x 3 P120,000
Apr. 1 - 38,000 x 3 114,000
July 1 - 53,000 x 6 318,000
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. D Legarda- 5/10 x 80% = 40% Sotto - 2/10 x 80% = 16%

Madrigal-3/10 x 80% = 24% Pimentel - 20%

40. B Share of Legarda = P25,000 ( P1,200 - P3,100 - P2,000 + P1,500 + P900

= P1,500 x 70% = P1,050) = P23,950 x 40% = P9,580