Colegio de San Gabriel Arcangel

Area E, City of San Jose del Monte, Bulacan

Lesson Module

Course Title: Accounting for Special Transactions Level: Second Year

Course Code: COGM6 Lesson No.: 1
Lesson Hours: 3

Objectives:

At the end of this Module, the student will be able to:

1. Acquire skills in recognizing and measuring partnership income and
expenses
2. Learn the different methods of allocating partnership profit or loss
3. Be able to determine the average capital balance of each partner
4. Prepare entries to record profit or loss distribution to partners
5. Correct errors and misstatements in the financial statements
6. Prepare Statement of Changes in Partner’s Equity

Subject Matter: Accounting for Partnership Operation

Procedures:
A. Motivation – the instructor will show slides for students to answer

B. Lesson Presentation

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 Suggested Solution

Case 1 Profit is divided equally

Income summary 600,000

Sacu, capital 300,000
Kappu,capital 300,000
600,000/2 = 300,000

Case 2 – Profit is divided ¾ and ¼ to Sacu and Kappu

Income summary 600,000

Sacu, capital 450,000
Kappu, capital 150,000
600,000 x ¾ = 450,000
600,000 x ¼ = 150,000

Case 3 – Profit is divided in the ratio of 1:2 to Sacu and Kappu

Income summary 600,000

Sacu, capital 200,000
Kappu, capital 400,000
Sacu 1/3 x 600,000= 200,000
Kappu 2/3 x 600,000= 400,000

Case 4 – Profit is divided 20% and 80% to Sacu and Kappu

Income summary 600,000

Sacu, capital 120,000
Kappu, capital 480,000
600,000 x 20% = 120,000
600,000 x 80% = 480,000

Case 5 – Profit is allocated based on the beginning capital ratio

Income summary 600,000

Sacu, capital 375,000
Kappu, capital 225,000
2500/4000 x 600,000 = 375,000
1500/4000 x 600,000= 225,000

Case 6 – Profit is allocated based on the ending capital ratio

Income summary 600,000

Sacu, capital 377,400
Kappu, capital 222,600
2,950/4,690 x 600,000=377,400
1,740/4,690 x 600,000=222,600

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 Case 7 – Profit is allocated based on the average capital ratio

Income summary 600,000

Sacu, capital 387,153
Kappu, capital 212,847
2,787,500/4,320,000 x 600,000
1,532,500/4,320,000 x 600,000

Case 8 – Each partner is allowed 10% interest on ending capital,

Balance 60%, 40%
Income summary 600,000
Sacu,capital 373,600
Kappu,capital 226,400

Case 9 – Kappu is allowed a salary of P500,000 , balance in the ratio

of 1:4

Income summary 600,000

Sacu,capital 20,000
Kappu,capital 580,000

Case 10 – Kappu the managing partner is allowed a bonus of 20% of

profit BEFORE bonus and income tax and the remainder in
the beginning capital ratio
600,000 x 20% = 120,000
( Solution will be provided later, upon discussion for Bonus)

Sacu Kappu Total

Bonus 120,000 120,000
2500/4000 x 480,000 300,000 180,000 480,000

300,000 300,000 600,000

Case 11 – the partners are allowed P5,000 and P10,000 weekly

salary , 10% on average capital and the balance in the ratio
of 2:3

Income summary 600,000

Sacu,capital 293,950
Kappu,capital 306,050

Case 12 – Assume same agreement on Case 10, except that instead of

a profit the partnership incurred a loss of P100,000

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 Illustration – Computation of Bonus

On October 1, 2018, Yvonne and Yuan established a partnership investing

P300,000 each. Part of their profit distribution is a bonus of 20% to Yuan, being
the manager partner. Determine the amount of bonus under each of the following
situations above assuming a net income for the year ended December 31, 2018
is P600,000. (Assume a tax rate of 30%)
Net income = 600,000
Income before tax = 600,000 / 70% = 857,143

 Bonus is based on profit before deducting bonus and income tax

 Bonus is based on profit after deducting bonus, but before deducting income tax
 Bonus is based on profit before deducting bonus but after deducting income tax
 Bonus is based on profit after deducting bonus and income tax

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 Illustration

Arnel, Ariel, Amiel Partnership uses the calendar as its accounting period. They
share profits on a 2:3:5 ratio. The reported income for 2018 and 2019. is
P272,500 and P231,100 respectively. However, it was discovered that the
following items were omitted in the records of the partnership:

Unrecorded at year end 2018 2019

Prepaid expenses 14,000
Accrued expenses 16,000 24,000
Accrued revenue 18,000
Unearned revenue 5,000 12,000
Unrecorded depreciation 5,000 6,000

Determine the corrected income for the years 2018 and 20192

If asset is understated – Income is also understated

If liability is under then income is over

Suggested Solution

2018 2019
Reported Net Income 272,500 231,100
Unrecorded at year end
Prepaid expenses 14,000 (14,000)
Accrued expenses (16,000) 16,000
Accrued expenses (24,000)
Accrued revenue 18,000
Unearned revenue (5,000) 5,000
Unearned revenue (12,000)

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 Unrecorded (5,000) (6,000)
depreciation
Corrected Net Income 260,500 214,100

Depreciation errors are non-counterbalancing

C. Application

EXERCISE 2-1
Althea, Bea, and Cattlea are partners operating a 24 hour gasoline station. Net
income for the current year was P360,000. Their capital accounts at the end of the
year before profits were distributed showed balances of P225,000, P270,000, and
P405,000 respectively. Prepare entries to close the income and expense summary
account to the partner’s capital accounts together with supporting computations
under each of the following methods of distributing profits and losses.
1. Profit will be divided equally
2. Profit will be divided according to the ratio of their ending capital balances
3. Profit is divided in the ratio of 20%:30%:50% to Althea, Bea, and Cattlea
respectively
4. Interest of 8% is allowed on their ending capital and the balance is to be divided
equally
5. Interest of 10% will be allowed on partner’s ending capital balances. The
remainder will divided in the ratio of 4:3:2
6. Annual salaries of P28,800, P21,600 and P14,400 will be allowed to Althea, Bea,
and Cattlea respectively. The remainder will be divided according to the ratio of
their ending capital balances.
7. Althea will be given a monthly salary of P1,800. All partners will be given 8% on
their ending capital balance. The remainder is to be divided 25% to Althea, 40%
to Bea, and 35% to Cattlea.

EXERCISE 2-2
The partners of HIV Partnership are Harold, Ivan, and Vino. During the current year,
their average capital balances are as follows:
Harold P560,000
Ivan 400,000
Vino 240,000

The partnership agreement provides that partners shall receive:

 Interest of 6% on their average capital balances
 Salary allowances as follows: Harold – none, Ivan – P96,000, Vino – P80,000
 Ivan, who manages the business, is to receive a bonus of 25% of income in
excess of P72,000 after partner’s interest and salary allowances

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  Residual profits will be divided in the ratio of 5:3:2

Instruction: Show how income or loss will be divided among the partners in each of
the following cases:

 Case 1 – Net Loss – P50,000

 Case 2 – Net Income – P132,000
 Case 3 – Net Income – P500,000

EXERCISE 2-3
Jasmin and Jonavi formed a partnership by investing P360,000 and P540,000
respectively. At the end of its first year of operations, the partnership has realized a
profit of P360,000.
Required: Determine the distribution of profit under each of the following
independent assumptions.
1. The partnership agreement does not mention profit sharing.
2. Profit is divided in the ratio of the original investment.
3. Interest at 8% is to be allowed on the original capital investments and the
balance to be divided equally.
4. Salaries of P162,000 and P135,000 respectively and the balance to be divided
equally.
5. Jasmin is to receive a bonus of 25% of net income. Interest of 10% is to be
allowed on the original investments and the balance to be divided equally.
6. Interest at 10% is to be allowed on the original investments, salaries of P150,000
and P225,000 to partners respectively and the balance to be divided in the ratio
of 2:3. In case of insufficient net income, however, this has to be distributed in
the salary ratio. While if there is a net loss, then it has to be distributed equally.

EXERCISE 2-4
Erwin and Eunice are partners operating a culinary school. They have agreed to
distribute profits in the ratio of their average capital balances. In determining their
average capitals, the partners have agreed that changes in capital balances
occurring on or before the 15 th of the month shall be considered as having been
made at the start of the month. Changes in capital balances occurring after the 15 th
of the month shall be considered as having been made at the end of the month.
The school earned a net income of P735,000 during the year. The following “T”
accounts show the capital accounts and the changes therein during the year.
Erwin Eunice
June 22 54,000 Jan 1 360,000 Apr 2 108,000 Jan 1 225,000
Sep 16 21,000 Dec 6 45,000 Dec 8 273,000 May 27 75,000
Dec 21 60,000 Sept 25 240,000

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 Required:
1. Determine the respective share of each partner in the profit of the partnership.
2. Prepare a statement of Partner’s equity for the fiscal year ending December 31,
2013

EXERCISE 2-5
The capital accounts of Ron and Rogie show the following facts for the fiscal year
ending December 31, 2013:
Ron Rogie
July 25 80,000 Jan 1 520,000 Aug. 24 40,000 Jan 1 330,000
Mar 30 60,000 May 18 100,000
May 10 140,000

The income and expense summary account shows a credit balance of P476,000 on
December 31, 2013.
Required: Prepare closing entries to close the income and expense summary
account to the partner’s capital accounts if the profit is to be distributed on each of the
following independent cases. Present computations for the distribution of profits.
1. In the ratio of beginning capital balance
2. In the ratio of ending capital balance
3. In the ratio of average capital balances. In determining their average capitals, the
partners have agreed that changes in capital balances occurring on or before the
15th of the month shall be considered as having been made at the start of the
month. Changes in capital balances occurring after the 15 th of the month shall be
considered as having been made at the end of the month.
4. Interest of 6% on average capitals, salaries to Ron and Rogie of P300,000 and
P200,000 respectively and the remainder equally.
5. Allowance to Ron of a bonus of 11% of the net profit. Bonus is considered as an
expense and is based on net income after tax. After bonus, interest of 5% shall
be allowed on the excess of average capital of any partner over that of the other,
and any remainder in the ratio of 3:2 to partners Ron and Rogie respectively.
6. Salaries of P30,000 and P20,000 a month to Ron and Rogie respectively,
provided annual earnings are sufficient to cover the allowance, if earnings are
insufficient, the profit shall be distributed in the salary ratio.

EXERCISE 2-6
Julius and Karylle are partners who share profits and losses in the ratio of 60%, 40%
respectively. Julius salary is P240,000 and P120,000 for Kyle. The partners are also
paid interest on their average capital balances. In 2013, Julius received P120,000 of
interest and Kyle, P48,000. The profit and losses allocation is determined after
deduction for salary and interest payments.

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 If Kyle’s share in the residual income (income after deducting salaries and interest)
was P240,000 in 2011, what was the total partnership income?

EXERCISE 2-7
Patricia is the managing partner of Powerpuff Partnership. She is given an incentive
of 5% bonus on profit. The profit after tax of 35% of the partnership is P1,300,000.
Determine the amount of bonus under each of the following assumptions:
1. Bonus is computed based on profit before deduction of bonus and income tax.
2. Bonus is computed based on profit before deduction for bonus but after
deduction for income tax
3. Bonus is computed based on profit after deduction for bonus but before
deduction for income tax
4. Bonus is computed based on profit after deduction for bonus and income tax

EXERCISE 2-8
Samoy, Sarmiento, and Sarza, who are partners of Grand Opera Luxury Spa, share
profits in the ratio of 30:20:50. The adjusted trial balance on December 31, 2013
follows:
Debits Credits
Cash 220,000.00
Accounts Receivable 160,000.00
Merchandise Inventory 1,600,000.00
Prepaid Rent 40,000.00
Prepaid Insurance 30,000.00
Accounts Payable 100,000.00
Notes Payable 230,000.00
Samoy, Capital 250,000.00
Sarmiento, Capital 550,000.00
Sarza, Capital 220,000.00
Sales 5,000,000.00
Cost of Sales 2,900,000.00
Salaries Expense 900,000.00
Rent Expense 400,000.00
Insurance Expense 60,000.00
Utilities Expense 40,000.00
Totals 6,350,000.00 6,350,000.00

Required:
1. Prepare the 2013 statement of comprehensive income. Show the division of
profit at the lower portion of the statement
2. Prepare the statement of changes in partner’s equity for 2013. Assume the
following additional information:

Capital Accounts Investments Withdrawals

January 1, 2013 During the year During the year
Samoy 150,000 100,000 -0-

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 Sarmiento 600,000 50,000 100,000
Sarza 300,000 -0- 80,000

3. Prepare the statement of financial position as at December 31, 2013.

EXERCISE 2-9
Jaymark, a partner in the Ewoks Salon, has a 25% participation in profit. Jaymark’s
capital account had a net decrease of P480,000 during the year 2013. During 2013,
Jaymark withdrew P1,040,000 (charged against his capital account) and invested in
the partnership a property with a fair value of P200,000.
Required: Determine the profit of the Ewoks Salon for the year 2013.

EXERCISE 2-10
The partnership agreement of Ebardone, Ellen, and Epiz written in 2005 specifies
that profits and losses are determined on the accrual basis and are divided as
follows:
Ebardone Ellen Epiz Total
Salary allowance 300,000 300,000 100,000 700,000
Bonuses (percentage of profits in 20% 20%
excess of P1,800,000)
Residual profit or loss 40% 40% 20%

On January 1, 2013, the partnership agreement was revised to provide for the
sharing of profits or losses in the following manner
Ebardone Ellen Epiz Total
Salary allowance 400,000 400,000 300,000 1,100,000
Bonuses (percentage of profits in 20% 20% 10%
excess of P2,200,000)
Residual profit or loss 35% 35% 30%

The partnership books showed a profit of P2,900,000 for 2013 before the following
errors were discovered:
a. Inventory at December 31, 2011 was overstated by P140,000
b. Inventory at December 31, 2012 was understated by P160,000
c. Inventory at December 31, 2013 was understated by P360,000
d. Depreciation expense for 2013 was understated by P100,000

Required:
1. Divide the profits among the partners for 2013, with the effects of prior years
errors to be treated as adjustments to beginning capital balance.
2. Assume that the reported profits for 2011 and 2012 were P1,700,000 and
P2,200,000, respectively, prepare the correcting entry on January 1, 2013. The
old profit and loss sharing agreement is used for these items.

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 D. Assessment

Name: ________________________________ Date: ___________________ Score:

Course/Year/Section: ____________________ Prof. ___________________________
100

Quiz No. 2
Accounting for Partnership Operation

____ 1. In the absence of agreement, the share of each partner in the profits and losses shall be
a. according to original capital contribution c. according to ending capital balance
b. according to average capital balance d. all of these

____ 2. Which of the following accounts is not closed in the closing process for a partnership
a. Mr. A, Capital c. Income Summary
b. Mr. A, Drawing d. Depreciation Expense
____ 3. Among the various options available for determining the partner’s share of net income are all of
the following, except
a. capital contributions c. loans to the partnership
b. stated fraction or ratio d. capital contribution & service to the partnership
____ 4. Partnership financial statements are much like those of
a. Professional corporations c. Regular corporations
b. Proprietorships d. Personal financial statements
____ 5. In a partnership, salaries are considered
a. an expense of the business c. a loss
b. an allocation of profits and losses d. a liability
____ 6. Partners Baron & Basil share income in a 2:1 ratio respectively. Each partner receives an
annual salary allowance of P72,000. If the salaries recorded in the accounts of the partnership
as an expense rather than treated as an allocation of profit, the total amount allocated to each
partner for salaries and profit would be
a. less for both Baron and Basil
b. unchanged for both Baron and Basil
c. More for Baron and less for Basil
d. More for Basil and less fro Baron
____ 7. Partners Paco and Pico share profit and losses equally after each has been credited with an
annual salary allowances of P90,000 and P72,000 respectively. Under this arrangement, Paco
will benefit by P18,000 more than Pico in which of the following circumstances?
a. Only if the partnership has profit of P162,000 or more for the year
b. Only if the partnership does not incur a loss for the year
c. In all profit or loss situation
d. Only if the partnership has profit of at least P18,000 for the year
____ 8. The Flio and Leo partnership agreement provides for Flio to receive a 20% bonus on profits
before the bonus. Remaining profits and losses are divided between Flio and Leo in the ratio of
2:3 respectively. Which partner has a greater advantage when the partnership has a profit or
when it has a loss
a. Profit – Flio; Loss – Leo c. Profit – Leo; Loss – Flio
b. Profit – Flio; Loss – Flio d. Profit – Leo; Loss – Leo

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____ 9. Jules and Kyle are partners who share profits and losses in the ratio of 60%, 40% respectively.
Jules salary is P60,000 and P30,000 for Kyle. The partners are also paid interest on their
average capital balances. In 2011, Jules received P30,000 of interest and Kyle, P12,000. The
profit and losses allocation is determined after deduction for salary and interest payments. If
Kyle’s share in the residual income (income after deducting salaries and interest) was P60,000 in
2011, what was the total partnership income?

a. P192,000 c. P282,000
b. P345,000 d. P387,000

____ 10. The partnership has the following accounting amounts:

 Sales – P70,000  Salary allocation to partners – P13,000
 Cost of goods sold – P40,000  Interest paid to banks – P2,000
 Operating expenses – P10,000  Partner’s withdrawals – P8,000

a. P20,000 c. P5,000
b. P18,000 d. (P3,000)
____ 11. Lacelle is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a
bonus of 10% of net income after salary and bonus as a means of allocating profit among the
partners. Salaries traceable to the other partners are estimated to be P100,000. What amount of
income would be necessary so that Lacelle would consider the choices to be equal?

a. P165,000 c. P265,000
b. P290,000 d. P305,000

____ 12. Carlo and Jose are considering forming a partnership whereby profits will be allocated through the
use of salaries and bonuses. Bonuses will be 10% of net income after total salaries and bonuses.
Carlo will receive a salary of P30,000 and bonus. Jose has the option of receiving a salary of
P40,000 and a 10% bonus or simply receiving a salary of P52,000. Both partners will receive the
same amount of bonus. Determine the level of net income that would be necessary so that Jose
Would be indifferent to the profit sharing option selected.

a. P240,000 c. P94,000
b. P300,000 d. P334,000

____ 13. The partnership agreement of Ana, Karen, Nina provides for the year-end allocation of net income
in the following order:
 Ana is to receive 10% of net income up to P200,000 and 20% over P200,000
 Karen and Nina each are to receive 5% of the remaining income over P300,000
 The balance of income is to be allocated equally among the three partners

The partnership’s 2011 net income was P500,000 before any allocations to partners. What
amount should be allocated to Ana?

a. P202,000 c. P206,000
b. P216,000 d. P220,000

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____ 14. Aquino, Bacudo and Cañete are partners with average capital balances during 2011 of P360,000,
P180,000, and P120,000 respectively. Partners receive 10% interest on their average capital
balances. After deducting salaries of P90,000 to Aquino and P60,000 to Cañete the residual profit
or loss is to be divided equally. In 2011 the partnership sustained a P99,000 loss before interest
and salaries to partners. By what amount should Aquino’s capital account change?

a. P21,000 increase c. P105,000 decrease

b. P33,000 decrease d. P126,000 increase
____ 15. The partnership agreement of Renee and Sally provides that interest at 10% per year is to be
credited to each partner on the base of weighted-average capital balances. A summary of the
capital account of Sally for the year ended December 31, 2011, is as follows:

Balance – January 1 P 420,000

Additional investment – July 1 120,000
Withdrawal – August 1 45,000
Balance – December 31 495,000
What amount of interest should be credited to Sally’s capital account for 2011?

a. P45,750 c. P46,125
b. P49,500 d. P51,750

____ 16. Andy and Dyna created a partnership to own and operate a health-food store. The partnership
agreement provided that Andy receive a salary of P10,000 and Dyna a salary of P5,000 to
recognize their relative time spent in operating the store. Remaining profit and losses were
divided 60:40 to Andy and Dyna respectively. Income for 2011, the first year of operations, of
P13,000 was allocated P8,800 to Andy and P4,200 to Dyna. On January 1, 2012, the partnership
agreement was changed to reflect the fact that Dyna could no longer devote any time to the
store’s operations. The new agreement allows Andy a salary of P18,000, and the remaining
profits and losses are divided equally. In 2012 an error was discovered such that the 2011
reported income was understated by P4,000. The partnership income of P25,000 for 2012
included the P4,000 related to year 2011. In the reported net income of P25,000 for the year
2012, Andy and Dyna would have.
a. Andy-P21,900; Dyna-P3,100 c. Andy-P0; Dyna-P0
b. Andy-P17,100; Dyna-P17,100 d. Andy-P12,500; Dyna-P12,500
____ 17. On January 1, 2011, Dada and Eden decided to form a partnership. At the end of the year, the
partnership made a net income of P120,000. The capital accounts of the partnership show the
following transactions:
Dada, Capital Eden, Capital
Debit Credit Debit Credit
January 1 40,000 25,000
April 1 5,000
June 1 10,000
August 1 10,000
September 1 3,000
October 1 5,000 1,000
December 1 4,000 5,000

Assuming that an interest of 20% per annum is given on average capital and the balance of the
profits is allocated equally; the allocation of profits should be

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 a. Dada-P60,000; Eden-P59,400 c. Dada-P67,200; Eden-P52,800
b. Dada-P61,200; Eden-P58,800 d. Dada-P68,800; Eden-P51,200
____ 18. Partner Ahbet first contributed P50,000 of capital into an existing partnership on March 1, 2011.
On June 1, 2011, the partner contributed another P20,000. On September 1, 2011, the partner
withdrew P15,000 from the partnership. Withdrawals in excess of P10,000 are charged to
partner’s capital account. The annual weighted average capital balance is

a. P62,000 c. P60,000
b. P51,667 d. P48,333
____ 19. The partnership of Dan & Bong was formed and commenced operations on March 1, 2011, with
Dan contributing P30,000 cash and Bong investing cash of P10,000 and an equipment with an
agreed valuation of P20,000. On July 1, 2011, Bong invested an additional P10,000 in the
partnership. Dan made a capital withdrawal; of P4,000 on May 2, 2011 but reinvested the P4,000
on October 1, 2011. During 2011, Dan withdrew P800 per month and Bong, the managing
partner, withdrew P1,000 per month. These drawings were charged to salary expense. A pre-
closing trial balance taken at December 31, 2011 is as follows:

Debit Credit
Cash 9,000
Receivable – net 15,000
Equipment – net 50,000
Other assets 19,000
Liabilities 17,000
Dan, Capital 30,000
Bong, Capital 40,000
Service revenue 50,000
Supplies expense 17,000
Utilities expense 4,000
Salaries to partners 18,000
Other miscellaneous 5,000
expense
Total 137,000 137,000

Compute for the share of Dan and Bong in the partnership net income assuming monthly salary
allowances of P800 and P1,000 for Dan and Bong respectively, interest allowance at a 12% on
average capita; balances; and remaining profits allocated equally.
a. Dan-P10,520; Bong-P13,480 c. Dan-P10,800; Bong-P13,200
b. Dan-P12,000; Bong-P12,000 d. Dan-P10,600; Bong-P13,400
e.
____ 20. Amy and Badeth formed a partnership in 2011 and made the following investments and capital
withdrawals during the year:
Amy Badeth
Debit Credit Debit Credit
March 1 30,000 20,000
June 1 10,000 10,000
August 1 20,000 2,000
December 1 5,000

The partnership profit and loss agreement provides for a salary of which P30,000 was paid to

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 each partner for 2011. Amy is to receive a bonus of 10% on net income after salaries and bonus.
The partners are also to receive interest of 8% on average annual capital balances affected by
both investments and drawings. Any remaining profits are to be allocated equally among the
partners. Assuming net income of P60,000 before salaries and bonus, determine how the income
would be allocated among the partners.

a. Amy-P31,138; Badeth-P28,862 c. Amy-P30,633; Badeth-P29,367

b. Amy-P33,537; Badeth-P26,463 d. Amy-P30,684; Badeth-P29,316

____ 21. Melay, a partner in Campbell Partnership, has a 30% participation in the partnership profits and
loss. Melay’s capital account has a net decrease of P1,200,000 during the calendar year 2011.
During 2011, Melay withdrew P2,600,000 and contributed property valued at P500,000 to the
partnership. What was the net income of the Campbell Partnership for the year 2011?

a. P3,000,000 c. P7,000,000
b. P4,666,667 d. P11,000,000
____ 22. Andoy, Budoy, and Caloy are partners with average capital balance during 2011 of P472,500,
P238,650, and P162,350 respectively. The partners receive 10% interest on their average capital
balances; after deducting salaries of P122,325 to Andoy and P82,625 to Caloy, the residual profits
or loss is divided equally. In 2011, the partnership had a net loss of P125,624 before interest and
salaries to partners.

By what amount should Andoy’s and Caloy’s capital account change-increase(decrease)

a. Andoy-P30,267; Caloy-(P40,448) c. Andoy-(P40,844); Caloy-P31,235
b. Andoy-P29,476; Caloy-P17,536 d. Andoy-P28,358; Caloy-32,458

____ 23. Using the same information in No. 14, except that the partnership had a net loss of P125,624 after
the interest and salaries to partners, by what amount should Budoy’s capital account change-
increase(decrease)?

a. (P115,443) c. (P41,875)
b. P28,865 d. (P18,010)
____ 24. On January 1, 2011, Blaza, Pasco, Luan and Rodel formed the Classic Trading, a partnership
with capital contributions as follows: Blaza – P150,000, Pasco – P75,000, Luan – P75,000 and
Rodel – P60,000. The partnership agreement stipulates that each partner shall receive a 5%
interest on capital contributed and that Blaza and Pasco shall receive salaries (chargeable as
expense of the business) of P15,000 and P9,000 respectively. The agreement further provides
that Luan shall receive a minimum of P7,500 per annum and Rodel a minimum of P18,000 which
is inclusive of amounts representing interest and their respective share in profits. The balance of
the profits shall be distributed among the partners in the ratio of 3:3:2:2 respectively.

What amount must be earned by the partnership in fiscal year 2009, before any charge for interest
and partner’s salaries, in order that Blaza may receive an aggregate of P37,500 including interest,
salary and share of profits.

a. P92,000 c. P50,000
b. P97,000 d. P90,000
e.
____ 25. Using the same information in No. 24, the total profit share of Luan is
a. P7,500 c. P19,400

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 b. P13,750
d. P37,500

Sal 26. Majenta, Minerva, and Urduja formed a partnership on January 1, 2011. They had the following
initial investments. Majenta – P200,000, Minerva – P300,000, Urduja – P450,000. The
partnership agreement states that profits and losses are to be shared equally by the partners after
consideration is made for the following:
 S1alary allowance of P120,000 for Majenta, P96,000 for Minerva, and P72,000 for Urduja.
 Average partner’s capital balances during the year shall be allowed 10% interest

Additional information
 On June 30, 2011, Majenta invested additional P120,000
 Urduja withdrew P140,000 from the partnership on September 31, 2011
 Share on the remaining profit was P10,000 each for each partner

How much is the total interest on average capital balances of the partners?
a. P95,000 c. P107,500
b. P97,500 d. P115,250

____ 27. Using the information in No. 26, partnership profit at December 31, 2011 before salaries, interest
and partner’s share in the remainder is
a. P395,500 c. P415,500
b. P399,500 d. P423,250
e.
____ 28. Using the information in No. 26, the total partnership capital on December 31, 2011 is

a. P950,000 c. P1,345,500
b. P970,000 d. P1,365,500

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