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Chapter 12
Partnership Operations

PROBLEM 1: TRUE OR FALSE

1. FALSE – capitalist
2. FALSE - ₱5
3. TRUE
4. TRUE
5. TRUE

PROBLEM 2: FOR CLASSROOM DISCUSSION

1. Solution:

Requirement (a):
A B Total
Amount being allocated 1,000,000
Allocation:
1. Salary of A 100,000 - 100,000
2. Bonus (1M – 100K) x 10% 90,000 - 90,000
3. Allocation of remaining profit
(1M profit – 100K – 90K) = 810K
(810K x 50%); (810K x 50%) 405,000 405,000 810,000
As allocated 595,000 405,000 1,000,000

Requirement (b):
Closing Income summary 1,000,000
entry A, Capital 595,000
B, Capital 405,000
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2. Solution:

Requirement (a):
A B Total
Amount being allocated (80,000)
Allocation:
1. Salary of A 100,000 - 100,000
2. Bonus - - -
3. Allocation of remaining loss
(– 80K – 100K) = -180K
(-180K x 50%); (-180K x 50%) (90,000) (90,000) (180,000)
As allocated 10,000 (90,000) (80,000)

Requirement (b):
Closing B, Capital 90,000
entry Income summary 80,000
A, Capital 10,000

3. Solution:

Mos.
outstanding Weighted
Balances
÷ Total mos. average
in a yr.
Beg. balance 500,000 12/12 500,000
Apr. 1 investment 100,000 9/12 75,000
July 31 withdrawal (200,000) 5/12 (83,333)
Sept. 1 investment 400,000 4/12 133,333
Dec. 1 investment 300,000 1/12 25,000
Weighted average capital balance 650,000
Multiply by: Interest rate 12%
Interest on weighted average capital balance 78,000
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A B Total
Amount being allocated 1,000,000
Allocation:
1. Salary of A 100,000 - 100,000
2. Bonus (1M – 100K) x 10% 90,000 - 90,000
3. Interest on capital 78,000 78,000
3. Allocation of remaining loss
(1M – 100K – 90K – 78K) = 732K
(732K x 50%); (732K x 50%) 366,000 366,000 732,000
As allocated 556,000 444,000 1,000,000

PROBLEM 3: COMPUTATIONS
1. Solution:

Requirement (a):
A B Total
Amount being allocated 1,200,000
Allocation:
1. Salaries 80,000 20,000 100,000
2. Bonus (1.2M – 100K) x 10% 110,000 - 110,000
3. Allocation of remaining profit
(1.2M profit – 100K – 110K) = 990K
(990K x 70%); (990K x 30%) 693,000 297,000 990,000
As allocated 883,000 317,000 1,200,000

Requirement (b):
Closing Income summary 1,200,000
entry A, Capital 883,000
B, Capital 317,000
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2. Solution:

Requirement (a):
A B Total
Amount being allocated (60,000)
Allocation:
1. Salaries 80,000 20,000 100,000
2. Bonus - - -
3. Allocation of remaining loss
(– 60K – 100K) = -160K
(-160K x 70%); (-160K x 30%) (112,000) (48,000) (160,000)
As allocated (32,000) (28,000) (60,000)

Requirement (b):
Closing A, Capital 32,000
entry B, Capital 28,000
Income summary 60,000

3. Solution:

Mos.
outstanding Weighted
Balances
÷ Total mos. average
in a yr.
Beg. balance 400,000 12/12 400,000
Apr. 30 investment 300,000 8/12 200,000
May 31 investment 200,000 7/12 116,667
Aug. 1 investment (100,000) 5/12 (41,667)
Dec. 1 investment 300,000 1/12 25,000
Weighted average capital balance 700,000
Multiply by: Interest rate 10%
Interest on weighted average capital balance 70,000
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A B Total
Amount being allocated 1,200,000
Allocation:
1. Salaries 100,000 20,000 120,000
2. Bonus (1.2M – 120K) x 10% 108,000 - 108,000
3. Interest on capital 70,000 70,000
3. Allocation of remaining loss
(1.2M – 120K – 108K – 70K) = 902K
(902K x 50%); (902K x 50%) 451,000 451,000 902,000
As allocated 659,000 541,000 1,200,000

PROBLEM 4: MULTIPLE CHOICE

1. C
2. B
Solution:

A B Total
Amount being allocated 100,000
Allocation:
1. Salaries 80,000 40,000 120,000
2. Allocation of remaining loss
(100K profit – 120K salaries) = -20K
(-20 x 50%); (-20K x 50%) (10,000) (10,000) (20,000)
As allocated 70,000 30,000 100,000
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3. A
Solution:
A B Total
Amount being allocated (20,000)
Allocation:
1. Salaries 10,000 40,000 50,000
2. Bonus - - -
3. Allocation of remaining loss
(– 20K – 50K) = -70K
(-70K x 60%); (-70K x 40%) (42,000) (28,000) (70,000)
As allocated (32,000) 12,000 (20,000)

4. A
Solution:
A B Total
Amount being allocated 200,000
Allocation:
1. Salaries 10,000 40,000 50,000
2. Bonus (200K – 50K) x 10% 15,000 - 15,000
3. Interest on capital (60K x 12%) 7,200 7,200
3. Allocation of remaining loss
(.2M – 50K – 15K – 7.2K) = 127.8K
(127.8K x 60%); (127.8K x 40%) 76,680 51,120 127,800
As allocated 101,680 98,320 200,000
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5. A
Solution:
A B Total
Amount being allocated 500,000
Allocation:
1. Bonus to A
First 200K: (200K x 2%) 4,000 4,000
Over 200K: [(500K - 200K) x 5%] 15,000 15,000
2. Bonus to B
(500K - 4K - 15K – 200K) x 1% 2,810 2,810
3. Allocation of remaining profit
(500K - 4K - 15K - 2.810K) ÷ 2 239,095 239,095 478,190
As allocated 258,095 241,905 500,000

6. C
Solution:
A (40%) B(40%) C(20%) Total
Amount being allocated 500,000
Allocation:
1. Salaries 100,000 20,000 120,000
2. Interest on capital (300K x 10%) 30,000 30,000
3. Allocation of remaining loss
(500K – 120K – 30K) = 350K 140,000 140,000 70,000 350,000
As allocated 240,000 160,000 100,000 200,000

Answer: 240,000 – 160,000 = 80,000 difference

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7. D
Solution:
Profit before salaries = 100,000 + 80,000 + 40,000 = 220,000

A B Total
Amount being allocated 220,000
Allocation:
1. Salaries 80,000 40,000 120,000
2. Allocation of remaining profit
(220K profit – 120K salaries) = 100K
(100K x 50%); (100K x 50%) 50,000 50,000 100,000
As allocated 130,000 90,000 220,000

8. A
Solution:
Annual salaries:
 A: (10,000 x 12 months) = 120,000
 B: (4,000 x 12 months) = 48,000

Profit before salaries = 360,000 + 120,000 + 48,000 = 528,000

A B Total
Amount being allocated 528,000
Allocation:
1. Salaries 120,000 48,000 168,000
2. Allocation of remaining profit
(528K profit – 168K salaries) = 360K
(360K x 50%); (360K x 50%) 180,000 180,000 360,000
As allocated 300,000 228,000 528,000
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9. B
Solution:

Step 1:
A, Capital
- beg.
Withdrawals 60,000 10,000 Additional investment
? Share in profit
end. 50,000

Step 2:

A, Capital
- beg.
Withdrawals 60,000 10,000 Additional investment
100,000 Share in profit (squeeze)
end. 50,000

Step 3: 100,000 ÷ 50% = 200,000

10. C
Solution:

Step 1:
A B Total
Amount being allocated ?
Allocation:
1. Salary of A 100,000 100,000
2. Bonus 90,000 90,000
3. Allocation of remaining profit

? ? ?
As allocated 595,000 ? ?
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Step 2:
A B Total
Amount being allocated ?
Allocation:
1. Salary of A 100,000 100,000
2. Bonus 90,000 90,000
3. Allocation of remaining profit

405,000(a) ? ?
As allocated 595,000 ? ?

(a) 595,000 – 100,000 – 90,000 = 405,000

Step 3:
A B Total
Amount being allocated ?
Allocation:
1. Salary of A 100,000 100,000
2. Bonus 90,000 90,000
3. Allocation of remaining profit

405,000 405,000(c) 810,000 (b)

As allocated 595,000 405,000(d) ?

(b) 405,000 ÷ 50% = 810,000

(c) 810,000 x 50% = 405,000
(d) equal to (c)

PROBLEM 5: CLASSROOM ACTIVITY

The students grade themselves and then submit the results to the
teacher for recording.