Dondoyano and Dellosa

Dondoyano and Dellosa entered into a partnership on Mar. 1,2010 by investing

P125,000 and P75,000, respectively They agreed that Dondoyano, as managing
receive a salary of P30,000 per year and a bonus computed at 10% of the " after
salaries; the balance of the profit is to be distributed in the ratio of their original capital
contributions.

On Dec. 1. 2010, the account balances were as follows:

P 70,000 Cash
67,000 Accounts Receivable
45,000 Furniture and Fixtures
5,000 Sales Returns
196,000 Purchases
60,000 Operating Expenses
60,000 Accounts Payable
233,000 Sales
125,000 Dondoyano, Capital
75,000 Dellosa, Capital
20,000 Dondoyano, Drawing
30,000 Dellosa, Drawing

Inventories on Dec 31, 2010 were as follows: supplies, P2,500 ; merchandise, P73,000,
Prepaid insurance was P950 while accrued expenses were P1,550. Depreciation rate
was 20% per year.

Required:
1. Prepare the statement of comprehensive income and distribute the profit.
2. Compute for the partners' ending capital balances.
1.
Dondoyano and Dellosa
Statement of Comprehensive Income
Year End of December 31, 2010

Note
Net Sales 1 P 228,000
Cost of goods sold 2 (120,500)
Gross Profit P 107,500
Less: Operating Expenses 3 68,050
Net Income P 39,450

Net Sales 1
Sales P233,000
Less: Sales Return (5,000)
Net Sales P228,000

Cost of goods sold 2

Purchase P196,000
Less: Ending Inventory (75,500)
Cost of goods sold P120,500

Operating Expense 3
Unadjusted Balance P60,000
Accrued Expense 1,500
Prepaid Insurance (950)
Depreciation (45k*20%*10/12) 7,500
Adjusted Balance P68,050

Adjusting Entry:

1. Operating Expense 1,500

Accrued Expense 1,500
To recognized expense accrued.

2. Prepaid Insurance 950

Operating Expense 950
To recognized prepaid insurance.

Distribution to Profit or Losses

Dondoyano Dellosa Total
Salary (30,000 * 10/12) P 25,000 P 25,000
Bonus (39,450-25,000 * 10%) 1,445 1,445
Balance to be Divided based on their
 Original capital contributions
(39,450-25,000-1,445=13,005)
Dondoyano: 13,005*125K/200K 8,128 8,128
Dellosa : 13,005*75k/200k P4,877 4,877
Share of Partners in Profits P 34,573 P4,877 P39,450

2.

Dondoyano and Dellosa

Statement of Changes in Partners’ Equity
For the Year End December 31, 2010

Dondoyano Dellosa Total

Original Investment P125,000 P75,000 P200,000
Add: Profit 34,573 4,877 39,450
Total P159,573 P79,877 P239,450
Less: Withdrawals (20,000) (30,000) (50,000)
Partners’ Equity Dec. 31,2010 P139,573 P49,877 P189,450

Closing Entry:

Income Summary 189,450

Dondoynao, Capital 139,573
Dellosa, Capital 49,877