Assignment for Partnership Operation

1.) The AB partnership has the following plan for the distribution of partnership net income
(loss):
A B
Salaries P100,000 P80,000
Bonus 6% 12%
Interest on average capital balance 7% 7%
Remainder (if positive) 60% 40%
Remainder (if negative) 50% 50%

Required: Calculate the distribution of partnership net income (loss) for each independent
situation below (For each situation, assume the average capital balance of A is P140,000 and of
B is P240,000)

Situation 1: Partnership net income is P360,000.

Situation 2: Partnership net income is P240,000.
Situation 3: Partnership net loss is P40,000.

2.) X, Y and Z Partnership was formed on January 1, 2021. The original cash investments were
as follows:
X P96,000
Y 144,000
Z 216,000

According to the general partnership contract. The partners were to be remunerated as follows:
● Salaries of P14,400 for X, P12,000 for Y and P13,600 for Z.
● Interest at 12% on the average capital account balances during the year.
● Remainder divided 40% to X, 30% to Y and 30% for Z.

Income before partners' salaries for the year ended December 31, 2021 was P92,080. X
invested an additional P24,000 in the partnership on July 1; Z withdrew P36,000 from the
partnership on October 1; and as authorized by the partnership contract, X, Y and Z each
withdrew P750 monthly against their shares of net income for the year.

Requirements:
1. Share of each partner in net income.
2. Capital balances of the partners on December 31, 2021.
3. If the salaries to partners are to be recognized as operating expenses by the partnership,
determine the share of each partner in net income.
3.) A and B organized AB Partnership on Jan. 1, 2021. The following entries were made into
their capital accounts during 2021:

The partnership agreement called for the following in the allocation of partnership profits and
losses:
● Salaries of P48,000 and P36,000 would be allocated to A and B, respectively.
● Interest of 8% on average capital balances will be allocated.
● B will receive a bonus of 10% on all partnership billings in excess of P300,000.
● Any remaining profits/losses will be allocated 60/40 to A and B, respectively

Required (account for each situation independently):

a. Determine the distribution of partnership net income. Assume the following priority of
allocation: interest, bonus, salaries, then remaining assuming partnership income of P85,000;
partnership billings amounted to P400,000.

b. Determine the distribution of partnership net income of P165,000 on billings of P400,000, No

specific priority is given to any of the allocation criteria.

4.) The net income of XY Partnership for 2021 amounted to P504,000. X is the managing
partner. Assume that the partners agreed on the allocation of net income as follows:
● Bonus of 20% to X.
● Salaries to X, P48,000 and Y, P72,000
● Interest on average capital balances: X, P14,400 and Y, P9,600.
● Residual balance in net income be allocated to X and Y in the ratio of 2:1 ratio.

Requirement: Compute for the bonus assuming:

1. Bonus is based on net income before bonus, salaries and interest
2. Bonus is based on net income after bonus but before salaries and interest.
3. Bonus is based on net income after bonus and salaries but before interest.
4. Bonus is based on net income after bonus, salaries and interest.
5. Bonus is based on net income after salaries but before bonus and interest
6. Bonus is based on net income after interest but before bonus and salaries.
7. [Assume that P504,000 is income before tax] Bonus is based on income before bonus but
after income tax (tax rate is 35%).
8. [Assume that P504,000 is income before tax] Bonus is based on net income, that is, after
bonus and income tax (tax rate is 35%).