ACCT 2A&B: Accounting for Partnership & Corporation

BCSV

ACCT 2A&B: Accounting for Partnership & Corporation I

Accounting for Partnership Operations
I. CONCEPTUAL SKILLS
1. Any salaries authorized for partners are regarded as a preliminary step in the division of profits, not as an
expense of the business.
2. Unless otherwise agreed, allowance for salaries and interest are allowed to partners whether there is a profit
or a loss; whether the
3. A stipulation of exempting an industrial partner from losses is void.
4. The partners of a certain partnership failed to make an agreement on how to allocate profit, so by default,
they should allocate profit and loss based on their average capital balances.

II. COMPUTATIONAL & ANALYTICAL SKILLS

Supply what is asked.

Problem 1:
Jer, Ic, and Ho are partners sharing profits on a 2:5:3 ratio. On Jan. 11, 2012, Anthony was admitted into the
partnership with a 25% share in the profits. The old partners continue to participate in profits proportionate to their
original ratios.

For the year 2012, the books showed a profit of P 700,000. It was disclosed, however, that the following errors were
made:

2011 2012
Accrued expense not recorded at year-end P 24,000

Inventory overstatement P 62,000

Purchases not recorded, for which goods have been received

and included in the inventory 40,000

Income received in advance not adjusted 30,000

Unused supplies not taken up at year-end 18,000

Questions to answer:
1. What is Ho’s new profit percentage share?
2. By how much did Jer’s profit percentage share change after the admission of Anthony? Indicate if
INCREASE or DECREASE
3. What is the correct profit of the partnership for the year 2012?
4. How much is Jer’s share in profit?
5. How much is Ic’s share in profit?

Problem 2:
Julia and Joshua entered into a partnership on April 1, 2013, investing P 625,000 and P 375,000, respectively. It was
agreed that Julia, the managing partner, is to receive a salary of P 162,875 per annum and 10% of net income after
adjustment for the salary, the partners failed to come into an agreement on how to allocate the remaining profit. On
March 31, 2014, account balances are as follows:

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Debit Credit
Cash 710,000
Accounts Receivables 335,000
PPE 225,000
Accounts payable 300,000
Julia, Capital 625,000
Julia, Drawing 100,000
Joshua, Capital 375,000
Joshua, Drawing 150,000
Sales 1,525,000
Sales returns 25,000
Purchases 980,000
Operating expenses 300,000

Additional information as of March 31, 2014:

1. Inventories: Supplies, P12,500 ; Merchandise, P365,000
2. Prepaid taxes and insurance, P 5,000
3. Accrued expenses, P 7,500
4. Depreciation on PPE, 20% per annum
5. Income tax rate is 30%

Determine the following:

6. Net income (loss)
7. Joshua’s share in net income (loss)
8. Julia’s share in net income (loss)
9. Joshua’s ending capital balance

Problem 3:
Fernan, Bernard, Ramil, & Wenzcarlo are partners. Their capital accounts during the year 2012 were as follows:

Capital, Fernan Capital, Ramil

9/1 120,000 1/7 800,000 3/ 3 180,000 1/7 1,200,000
4/14 160,000 7/3 140,000
11/1 60,000 9/28 100,000

Capital, Wenzcarlo Capital, Bernard

11/2 75,000 1/7 600,000 5/16 200,000 1/7 1,500,000
12/5 108,000 6/12 210,000 12/12 550,000 2/21 60,000
12/20 340,000 7/13 140,000

Assumption 1: Interest at 9% is to be allowed on the beginning capital of each partner. Salaries of P 145,000, P
110,000, P 170,000, & P 165,000 to Fernan, Wenzcarlo, Bernard, & Ramil, respectively. Residual income is to be
divided in the ratio of 2:3:1:4 to Bernard, Wenzcarlo, Fernan, & Ramil, respectively. Profit for the year is P 1,140,000
Determine the following:
10. Total share of Wenzcarlo in the profit
11. Total share of Bernard and Ramil in the profit
12. Ending capital balance of Bernard
13. Share of Fernan in the remaining income

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14. Total capital of Wenzcarlo and Fernan after allocation of profit

Assumption 2: Interest at 12% is to be allowed on the beginning capital balance of each partner. Salaries of P
115,000 and P 200,000 to Fernan and Wenzcarlo, respectively. Bonus of 15% and 20% after interest and salaries to
Ramil and Bernard, respectively. Residual income (loss) is to be divided equally among the partners. Net loss for the
year is P 1,450,000
Determine the following:
15. Bonus received by Ramil
16. Total share of Bernard in the loss
17. Total capital balance of Fernan and Ramil after allocation
18. Total share of Wenzcarlo and Ramil in the loss
19. Capital balance of Bernard after allocation of loss

Assumption 3: Each partner is to be credited 9% interest on his average capital. Salary of P 300,000 to Bernard.
Bonus of 20% to Wenzcarlo after all interest but before salary and 25% bonus to Fernan after all interest, salary, and
bonuses. Any remaining profit is to be divided based on beginning capital balance. Profit (loss) for the year is P
905,000
Determine the following:
20. Average capital of Ramil
21. Bonus received by Fernan
22. Total share of Wenzcarlo in the profit
23. Total share of Ramil and Bernard in the profit
24. Capital balance of Fernan after allocation of profit
25. Total capital balance of Ramil, Bernard, & Wenzcarlo after allocation of profit

Problem 4:
Kat, Ri, and Na are partners with average capital balances during 2007 of P 945,000, P 477,300 and P 324,700,
respectively. The partners receive 10% interest on their average capital balances, salaries of P 266,000 to Ri and P
199,800 to Kat, any residual profit (loss) is divided in the ratio of 10:30:40 Ri, Kat, & Na, respectively.

Assumption 1: The partnership had a net loss of P 269,000.

Determine the following:
26. Share of Na in the loss
27. Share of Kat in the loss

Assumption 2: The partnership had a profit of P102,000.

Determine the following:
28. Share of Ri in the profit
29. Share of Kat in the profit

Problem 5:
Brian and Jonas formed Giant B and J Enterprises several years ago. The partnership agreement states that each
partner is to receive a salary of P 13,500 per month; 6% and 7% interest on beginning capital balance to Brian and
Jonas, respectively. It is agreed that Brian will receive a 30% bonus on profit after interest and salaries. Any
remainder would be divided between Brian and Jonas in the ratio of 1:4 respectively. The unadjusted trial balance of
the partnership as of December 31, 2002 is presented below:

Debits Credits
Cash P 1,000,000 Accounts payable P 700,000
Accounts receivable 600,000 Notes payable 400,000
M. Inventory, Jan.1 800,000 Brian, Capital 1,500,000

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Building (net) 700,000 Jonas, Capital 1,240,000

Land 600,000 Sales 1,800,000
Brian, drawing 200,000
Jonas, drawing 240,000
Purchases 1,200,000
Operating expense 300,000

Additional information:
1. The M. inventory on Dec. 31, was P 1,100,000
2. Depreciation on building is 15% of the net value.
3. On June 30, 2002, the partnership recorded a P 200,000 additional capital contribution by Brian. Jonas
made no additional capital contributions during the year
4. Income tax rate is 30%

Questions to answer:
30. How much is the enterprises’ cost of sales for the year?
31. How much is the net income (loss) for the year?
32. How much bonus did Brian received?
33. How much is the total share of Jonas in the profit (loss)?
34. What is the balance of Brian’s capital after adjustments & allocation of profit?
35. What is the balance of Jonas’ capital after adjustments & allocation of profit?
36. Who has the highest capital after adjustments & allocation?

Problem 6:
Antonio, Jose, and Ricardo are partners sharing profits on a 5:2:3 ratio. On Jan. 14, 2009, Arnold was admitted into
the partnership with a 15% share in the profits. The old partners continue to participate in profits proportionate to their
original ratios.

For the year 2009, the books showed a profit of P 874,500. It was disclosed, however, that the following errors were
made:

2008 2009

~~~~

“If ever there was a time to follow your passion and do something that matters to you now is
certainly that time.”

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ACCT 2A&B: Accounting for Partnership & Corporation
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*Suggested Key*
I. CONCEPTUAL SKILLS
1. A 11. A
2. B 12. B
3. B 13. A
4. A 14. B
5. A 15. A
6. B 16. A
7. B 17. A
8. B 18. B
9. B 19. A
10. B 20. A
II. COMPUTATIONAL & ANALYTICAL SKILLS
1. 22.5% 19. P 565,750
2. 5% decrease 20. P 1,145,000
3. P 670,000 21. P 24,413.60 / 24,414
4. P 100,500 22. P 182,898
5. P 251,250 23. P 598,534
6. P 385,000 24. P 1,023,568.60 / 1,023,569
7. P 74,967.19 25. P 3,958,432
8. P 310,032.81 26. (P 422,280)
9. P 299,967.19 27. (P 46,762.50)
10. P 218,300 28. P 246,417.50
11. P 686,600 29. P 92,362.50
12. P 1,291,200 30. P 900,000
13. P 18,100 31. P 346,500
14. P 2,320,400 32. P -0-
15. P -0- 33. P 134,960
16. (P 384,250) 34. P 1,511,540
17. P 1,386,500 35. P 1,134,960
18. (P 712,500) 36. BRIAN
37. 42.5%
38. 4.5 DECREASE
---- 39. P 673,500
40. P 114,495
41. P 101,025

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