A and B entered into a partnership as of March 1,2009 by investing P125,000 and P75,000,

respectively, they agreed that A, as the managing partner, was to receive a salary; P30,000 per year
and a bonus computed at 10% of the net profit after adjustment for the salary; the balance of the profit
was to be distributed in the ratio of their original capital balances.On December 31,2009 account
balances were as follows:
Cash 70,000 Accounts Payable P60,000
Accounts receivable 67,000 A,capital 125,000
Furnitures and fixture 45,000 B,capital 75,000
Sales returns 5,000 A,drawing -20,000
Purchases 196,000 B,drawing -30,000
Operating expenses 60,000 Sales 233,000
Inventories on December 31, 2009 were as follows: supplies, P2,500, merchandise, P73,000, Prepaid
insurance was P950 while while accrued expenses were P1,550. Depreciation rate was 20% per year.
The partners' capital balances on December 31, 2009, after closing the net profit and drawing accounts,
were:
A B A B
a. P135,940 P47,960 c. P139,680 P48,680
b. P139,540 P49,860 d. P142,350 P47,670

ANSWER
Schedule 1- Computation and Distribution of Net Profit

Net Sales (P233,000-5,000) P228,000

Cost of Sales (P196,000-73,000) P123,000
Expenses:
Operating expense P60,000
Supplies -2,500
Prepaid insurance -950
Accrued expense 1,550
Depreciation (45,000 x 20% x 10 7,500 65,600 -188,600
Net profit P39,400

Distribution of Net Profit Total A B

Salary: (P30,000 x 10/12) P25,000 P25,000 P-
Bonus: (P39,400-P25,000) x 10 1,440 1,440 -
Remainder, at 5:3 12,960 8,100 4,860
Total P39,400 P34,540 P4,860
Partner's Capital balances, Dec. 31,2009: A B
Initial investments P125,000 P75,000
Share in Profit (Schedule 1) 34,540 4,860
Drawing -20,000 -30,000
Dec. 31,2005 capital balances P139,540 P49,860