PARTNERSHIP OPERATION

PROBLEM NO. 1
RONALD, GINO and RIZA are manufacturers’ representative in the wholesale business. Their capital
accounts in AQX Partnership in 2030 were as follows:

RONALD GINO RIZA

January 1, Balances P135,000 P180,000 P75,000
March 1, Withdrawal - 36,000 -
April 1, Investment - - 30,000
May 1, Investment 72,000 - -
June 1, Investment - 27,000 -
August 1, Withdrawal - - 9,000
October 1, Withdrawal 54,000 - -
December 1, Investment - 18,000 -

REQUIRED: For each of the following independent income sharing agreements, prepare an income
distribution schedule.
a. Monthly salaries are P30,000 to RONALD, P50,000 to GINO and P45,000 to RIZA. RONALD
receives a bonus of 5% of net income after deducting his bonus. Interest is 12% of ending capital
balances. Any remainder is divided by RONALD, GINO and RIZA in a 25:40:35 ratio. The Income
Summary account has a credit balance of P2,835,000 before closing.

b. Interest is 10% of weighted average capital balances. Annual salaries are P480,000 to RONALD,
P630,000 to GINO and P510,000 to RIZA. GINO receives a bonus of 25% of net income after
deducting the bonus and his salary. Any remainder is divided in a 2:3:4 ratio by RONALD, GINO
and RIZA, respectively. Net Income was P1,050,000 before any allocations.

c. RIZA receives a bonus of 20% of net income after deducting the bonus and the salaries. Annual
salaries are P600,000 to RONALD, P540,000 to GINO and P750,000 to RIZA. Interest is 15% of
the ending capital in excess of P140,000. Any remainder is to be divided by RONALD, GINO and
RIZA in the ratio of their beginning capital balances. Net Income was P1,740,000 before any
allocations.

d. Monthly salaries are P32,000 to RONALD, P40,000 to GINO and P42,000 to RIZA. GINO receives
a bonus of 10% of net income after deducting his bonus. Interest is 25% on the excess of the ending
capital balances over the beginning capital balances. Any remainder is to divided by RONALD,
GINO and RIZA in a 3:2:1 ratio. The Income Summary account has a debit balance of P750,000
before closing.

PROBLEM NO. 2

The capital accounts of Chris and Toper shows the following information for the year 2020.

Chris Toper
January 1 P520,000 P330,000
March 14 30,000 -
March 20 (Temporary) - (15,000)
April 30 - 24,000
May 25 (Permanent) (22,500) (12,000)
July 1 5,000 -
September 10 (Temporary) (15,000) -
October 1 - 30,000

The income summary account shows a credit balance of P450,000 on December 31, 2020. The profit and
loss of the partnership shall be distributed in the following manner:
 Salary allowance of P200,000 to Chris and P230,000 to Toper.
 Interest allowance of 12% on average capitals.
 Bonus of 10% on net income after salary and interest but before bonus to Toper.
 Balance divided equally.

REQUIRED: Compute the ending capital balances of Chris and Toper.

PROBLEM NO. 3

Pam and Drix formed a partnership in 20x1 to operate a bookkeeping services. Pam contributed the initial
capital while Drix managed the business. With the assistance of their consultants, they have arrived at the
following agreement.
1. Each partner is allowed to withdraw P1,000 in cash from business every month. Any withdrawal in
excess of that figure will be accounted for as a direct reduction to the partner’s capital balance.
2. Partnership profits and losses will be allocated each year according to the following plan:
 Interest of 15% will be accrued by each partner based on the monthly average capital
balance for the year.
 As the managing partner, Drix is to receive credit for a bonus equal to 20% of the year’s
net income.
 Any remaining profit or loss will be divided equally between the two partners.

Pam and Drix begin the year of 20x1 with capital balances of P150,000 and P30,000, respectively. On April
1 of the year, Pam invested additional P8,000 cash in the business, while on July 1, Drix withdraws P6,000
in excess of the specified drawing allowance. The partners withdraw the amount of cash allowed every
month. The partnership reports net income of P30,000 for 20x1.

REQUIRED: Compute the ending capital balances of Pam and Drix.

PROBLEM NO. 4

The partnership of Mark, Luke and John was formed on January 1, 2030. The original investments were as
follows: Mark, P840,000; Luke, P1,260,000; John, P1,890,000. According to the partnership agreement,
net income or loss will be divided among the respective partners as follows: (1) salaries of P126,000 for
Mark, P105,000 for Luke, and P84,000 for John. (2) Interest of 8% on the average capital balance during
the year to each partner. (3) The remainder is divided equally.

Additional information is as follows: Net Income of the partnership for the year ended December 31, 2030
was P735,000. Mark invested an additional P210,000 in the partnership on July 1, 2030. John withdrew
P315,000 from the partnership on October 1, 2030. Mark, Luke, and John made regular drawings against
their shares of net income during 2030 of P105,000 each.

REQUIRED: Compute the ending capital balances of partners as of December 31, 2030

PROBLEM NO. 5

Marie, Paz and Love formed partnership on January 1, 20x1. The contribution of the partners are as follows:
Marie P300,000, Paz P250,000 and Love P450,000. The following are the agreements of the partners:
 Monthly salary to Marie, Paz and Love of P5,000 each.
 Bonus to Marie of 10% of net income after interests and bonus.
 Interest of 5% based on the capital contribution. The interest is treated as expense as per agreement
of the partners.
The net income of the partnership in year 20x1 is P264,000.

REQUIRED: Compute the share of all partners from net income for the year.

PROBLEM NO. 6

AB Partnership has net income of P50,000 for the year. Partner A contributed P90,000 and partner B
contributed P60,000. The partners agree to share profits and losses as follows:
 Salary allowance of P15,000 and P30,000 of A and B, respectively.
 Interest allowance of P 10% based on average capital.
 Bonus of 10% based on net income to be given to A.
 Balance equally.

The net income is allocated up to the extent of earning only by giving first priority to salary, then interest
and then to bonus.

REQUIRED:

a. Based on the above information, compute the share of all partners from net income for the year.
b. Using the information in above, except that the net income is P61,000. Compute the share of all
partners from net income for the year.