Partnership Operation

Problem Solving:

1. On January 1, 2021, A, B and C formed ABC Partnership with total agreed capitalization of
P1,000,000. The capital interest ratio of ABC Partnership is 5:1:4 while the profit or loss ratio is
3:2:5 respectively for A, B and C.

During 2021, A and B made additional investments of P200,000 and P500,000, respectively. At the
end of 2021, B and C made drawings of P300,000 and P100,000, respectively. On December 31,
2021, the capital balance of B is reported at P200,000.

A. What is the net income or net loss of ABC Partnership for the year ended December 31,2021?
B. What is the capital balance of C on December 31, 2021?

2. On January 1, 2021, A, B and C formed ABC Partnership with original capital contribution of
P300,000, P500,000 and P200,000. A is appointed as managing partner.

During 2021, A, B and C made additional investments of P500,000, P200,000 and P300,000,
respectively. At the end of 2021, A, B and C made drawings of P200,000, P100,000 and P400,000,
respectively. At the end of 2021, the capital balance of C is reported at P320,000. The profit or
loss agreement of the partners is as follows:

• 10% interest on original capital contribution of the partners

• Quarterly salary of P40,000 and P10,000 for A and B, respectively.
• Bonus to A equivalent to 20% of Net Income after interest and salary to all partners
• Remainder is to be distributed equally among the partners

A. What is the partnership profit for the year ended December 31,2021?
B. What is A’s share in partnership profit for 2021?
C. What is B’s share in partnership profit for 2021?

3. On January 1, 2021, K and S formed KS Partnership and the articles of co-partnership provides
that profit or loss shall be distributed accordingly:

• 10% interest on average capital balances

• P50,000 and P100,000 quarterly salary for K and S, respectively.
• The remainder shall be distributed in the ratio of 3:2 for K and S, respectively.

The following transactions regarding the capital balances of the partners for year 2021 are
provided:
 K Capital S Capital
January 1, 2021 investment P1,000,000 P500,000
March 31,2021 investment P100,000
July 1, 2021 withdrawal (P200,000)
September 30,2021 withdrawal (P200,000)
October 1,2021 investment P700,000

The chief accountant of the partnership reported net income of P1,000,000 for year 2021.

A. What is the capital balance of K on December 31,2021?

B. What is the capital balance of S on December 31, 2021?

4. On July 1, 2021, D and J formed DJ Partnership with initial investment of P1,000,000 and
P2,000,000, respectively. D is appointed as the managing partner.

The articles of co-partnership provide that profit or loss shall be distributed accordingly:
• 30% interest on original capital contribution ratio
• Monthly salary of P20,000 and P10,000 respectively for D and J.
• D shall be entitled to bonus equivalent to 20% of net income after interest, salary, and
bonus.
• The remainder shall be distributed in ratio of 3:2 for D and J, respectively.

For the year ended December 31, 2021, the partnership reported net income of P750,000.

A. What is share in net income of for the year ended December 31, 2021?
B. Using the same data, what is the share in net income of J assuming the bonus is equivalent to
20% of net income after interest and salary but before bonus for the year ended December
31, 2021?

5. Partners Samson and Delilah have profit and loss agreement with the following provisions:
Salaries of P90,000 and P135,000 for Samson and Delilah, respectively: a bonus to Samson of 10%
of net income after salaries and interest of 10% on average capital balances of P60,000 and
P105,000 for Samson and Delilah, respectively. One – third of any remaining profits will be
allocated to Samson and balance to Delilah.

A. If the partnership had net income of P66,000, how much should be allocated to Partner
Samson, assuming that the provisions of the profit and loss agreement are ranked by order
of priority starting with 1) salaries 2) interest 3) bonus and up to the extent of the ranking
only?