REVIEW ON PARTNERSHIP OPERATION

Problem 1
Shanks, Beckman, and Yassop are partners in Red Hair Partnership. Below shows their profit or
loss agreement and the changes in their capital accounts during the second year:

1. Distribute P50,000 fixed salary as capital credit to each of them.

2. Distribute 15% interest as capital credit based on capital balances.
3. Distribute 10% bonus as capital credit to Yassop as managing partner.
4. Distribute the remaining profit based on their agreed sharing ratio of 45:30:25.

Shanks Beckman Yassop

Beginning balance P350,000 P230,000 P200,000
March 31 70,000 ( 50,000) 55,000
July 1 ( 35,000) 75,000 ( 20,000)
September 30 ( 10,000) 40,000 15,000

Scenario 1: If the partnership earned net profit of P500,000, compute the share of each partner
on the net profit assuming:

1. The interest is based on beginning capital and the bonus is based on net profit
before salaries and interests.
2. The interest is based on ending capital before adjustment from distribution and
bonus is based on net profit after salaries and interests.
3. The interest is based on weighted average capital and bonus is based on net profit
after bonuses.

Scenario 2: The partnership earned net profit of P200,000, compute the share of each partner
on the net profit assuming:

1. The interest is based on beginning capital and the bonus is based on net profit
before salaries and interests, but after bonus.
2. The interest is based on ending capital before adjustment from distribution and
bonus is based on net profit after salaries, interests, and bonuses.
3. The interest is based on weighted average capital and bonus is based on net profit
before salaries, interests, and bonuses.

Scenario 3: The partnership incurred net loss of P150,000, compute the share of each partner on
the net loss assuming:

1. The interest is based on beginning capital.

2. The interest is based on ending capital before adjustment from distribution.
3. The interest is based on weighted average capital.

Problem 2
Rimuru is trying to decide whether to accept a salary of P80,000 or a salary of P50,000 plus a
bonus of 10% of net income after salary and bonus as a means of allocating profit among the
partners. Salaries traceable to other partners are estimated to be P100,000.

Requirement: What amount of income would be necessary so that Rimuru would

consider the choices to be equal?
Problem 3
The partnership of Godzilla and Kingkong has the agreement of distributing interest equal to 12%
per year as a credit to each partner on the basis of their capital balances. Below shows the
summary of accounts of Godzilla for the second year:

January 1 balance P210,000

June 30 additional investment 60,000
August 31 withdrawal 25,000
December 31 balance before share in profit or loss 245,000

Requirement: What amount of interest should be credited to Godzilla’s capital account

for the second year under the following assumptions?

1. Interest is based on beginning balance.

2. Interest is based on ending balance.
3. Interest is based on average balance.

Problem 4
Akainu, Kizaru, and Kuzan are partners with average capital balances during the second year of
P720,000, P360,000, and P240,000, respectively. Each of them is entitled to receive 7% interest
on their average capital balances. After considering salaries of P90,000 and P60,000 respectively
to Akainu and Kizaru, the remaining profit or loss is divided equally. During the second year, the
partnership earned profit of P150,000 before salaries and interests.

Requirement: What amount should each partner’s capital account increase or decrease?

Problem 5
Anos, Misha, and Sasha are partners in Misfit Partnership and have the following agreement for
the allocation of net profit in chronological order:

1. Anos is to receive 15% of net profit up to P300,000 and 25% over P300,000.
2. Misha and Sasha are to receive 10% of the remaining income over P200,000.
3. Any excess profit is to be allocated based on the ratio of 4:3:3.

The partnership net profit for the year amounted to P500,000 prior to distribution to partners.

Requirement: What amount each partner should receive as profit allocation?

Problem 6
Ayano, Kisara, and Sharon are partners in Engage Partnership with capital balances of P500,000,
P480,000, and P525,000, respectively. During the current year, the partnership earned a net
profit. They agreed to receive equal amount of salary, 5% interest based on capital balances,
bonus, if any, and the excess in the ratio of 3:5:2. Ayano’s capital increased to P693,683, only
Kisara received a bonus of P37,473 as managing partner which is 12% of net profit after salaries,
interests, and bonuses, while Sharon’s share in the excess profit is P62,455.

Requirement: How much is the net profit earned by the partnership in the current year?