ACCOUNTING FOR SPECIAL TRANSACTIONS

Numbers 1, 2, and 3 (Partnership Operation – Distribution of profit or loss)

On January 1, 2018, 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 2018, A, B and C made additional investments of P500,000, P200,000 and P300,000,
respectively. At the end of 2018, A, B and C made drawings of P200,000, P100,000 and P400,000,
respectively. At the end of 2018, 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.

1. What is the partnership profit for the year ended December 31, 2018?
A. 900,000
B. 1,020,000
C. 1,050,000
D. 960,000

2. What is A’s share in partnership profit for 2018?

A. 190,000
B. 340,000
C. 540,000
D. 200,000

3. What is B’s share in partnership profit for 2018?

A. 200,000
B. 290,000
C. 50,000
D. 90,000