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20

Chapter 2

CHAPTER 2
MULTIPLE CHOICE ANSWERS AND SOLUTIONS
2-1: d
Jordan
P120,000
( 10,000)
P110,000

Annual salary
Balance, equally
Total

Pippen
Total
P80,000 P200,000
( 10,000) ( 20,000)
P 70,000 P180,000

2-2: a
Bonus (.20 X P90,000)
Interest
JJ (.15 X P100,000)
KK (.15 X P200,000)
LL (.15 X P300,000)
Balance, equally
Total profit share

JJ
P18,000

KK

P15,000

P 30,000

( 6,000)
P27,000

( 6,000)
P 24,000

LL

Total
P 18,000

)
)
P45,000)
90,000
( 6,000) ( 18,000)
P39,000 P 90,000

2-3: a
2-4: a
Allan
Interest
Allan - .10 X (P40,000 + 60,000 /2)
Michael - .10 X (P60,000 + 70,000/2)
Balance, equally
Total

P 5,000
_14,000
P 19,000

Michael

Total

)
P 6,500) P 11,500
_14,000 __28,000
P20,500 P 28,000

2-5: a
Fred
P12,000
30,000
( 35,000)
P 7,000

Interest (.10 of average capital)


Salaries
Balance, equally
Total

Greg
P 6,000
( 35,000)
( P29,000)

2-6: b
Average Capital
Date
January 1
July 1
August 1

Capital
Balance
140,000
180,000
165,000

Months
Unchanged
6
1
5
12

Peso
Months
P 840,000
180,000
__825,000
P1,845,000

Average capital - P1,845,000/12

P153,750

Interest

P 15,375

(P153,750 X 10%)

Henry
Total
P 4,000 P 22,000
20,000
50,000
( 35,000) (105,000)
(P11,000) (P 33,000)

Partnership Operations

21

2-7: c
Date
January 1
April 1
June 1
September 1

Capital
Balance
P16,000
17,600
19,200
15,200

Months
Unchanged
3
2
3
4
12

Average Capital(P201,600/12) =

Peso
Months
P 48,000
35,200
57,600
__60,800
P201,600

P16,800

2-8: a
Net profit before bonus
Net profit after bonus (P24,000/120%)
Bonus to RJ
Balance (P24,000-P4,000)X3/5
Total profit share

P 24,000
__20,000
4,000
__12,000
P 16,000

2-9: a
AM
P 3,600
7,500
( 7,720)
P 3,380

Total
P 6,800
22,500
( 19,300)
P 10,000

Net income after salary, interest and bonus


Add back: Salary (P10,000 X 12)
P120,000
Interest (P250,000 X .05)
__12,500
Net income after bonus (80%)
Net income before bonus (P600,000/80%)
Paul's bonus

P467,500

Interest
Salaries
Balance, 3:2
Total

LT
P3,200
15,000
(11,580)
P 6,620

2-10: b

_132,500
P600,000
_750,000
P150,000

2-11: b
CC
Salary
Balance
Additional profit to DD
Total

P14,000
( 1,500)
P12,500

Net income
Fees Earned
Expenses
Net Income

P90,000
_48,000
P42,000

DD
P 8,400
__2,100
P10,500

EE
Total
P 14,000 P 14,000
5,600
28,000
( 600) ______
P 19,000 P 42,000

22

Chapter 2

2-12: c
Interest
Annual Salary
Additional profit to give LL, P20,000
Additional profit to give MM, P14,000
Total
*(P9,500/50%) = P19,000

LL
P 2,000
8,500
9,500
_____
P20,000

MM
P 1,250

5,700
__7,050
P14,000

NN
P 750

3,800
_____
P 4,550

Total
P 4,000
8,500
19,000*
__7,050
P 38,550

RR

SS

TT

Total

P15,000

_47,500
P62,500

(P10,000)
_35,625
P25,625

)
)
_11,875
P11,875

P 5,000
__95,000
P100,000

BB

CC

Total

2-13: a
Excess (Deficiency)
RR (P80,000 - P95,000)
SS (P50,000 - P40,000)
Balance 4:3:1
Total
Net Income

(200,000 - 100,000) =

2-14: b
AA - 100,000 X 10%
150,000 X 20%
Remainder, 210,000
BB (60,000 X .05)
CC (60,000 X .05)
Balance, equally
Total

P100,000
AA
P 10,000
30,000

)
)

P 40,000

)
P 3,000
_68,000
P71,000

6,000
_204,000
P250,000

BJ

CJ

Total

P1,000

_6,800
P7,800

P4,000

12,000
__3,400
P19,400

P4,000
1,000
22,000
_17,000
P44,000

P 3,000
__68,000
P108,000

_68,000
P71,000

2-15: a
AJ
Bonus to CJ
Net profit before bonus
P44,000
Net profit after bonus (P44,000/110%)P40,000

Interest to BJ

Salaries
P 10,000
Balance, 4:4:2
__6,800
Total
P 16,800
2-16: c
Total profit share of Pedro
Less: Salary to Pedro
Interest
Share in the balance (40%)

P 50,000
__20,000

P200,000

Net profit after salary and interest (130,000/40%)


Add: Total Salaries
Total Interest
Total Partnership Income

P150,000
__70,000

__70,000
P130,000
P325,000
_220,000
P545,000

Partnership Operations

23

2-17: c
Net income before extraordinary gain and bonus (69,600-12,000)
Net income after bonus (57,600/120%)
Bonus to RR

P 57,600
_48,000
P 9,600

Distribution of Net Income:


JJ
Bonus
Balance, equally
Net profit before extraordinary gain
Extraordinary gain
Total

P 24,000
P 24,000
__4,800
P 28,800

RR
P 9,600
24,000
P 33,600
__7,200
P 40,800

Interest
Annual Salary
Remainder 60:40
Total

Mel
P 20,000
36,000
__60,000
P116,000

Jay
P 12,000

_40,000
P 52,000

Interest on excess (Deficiency)


Remainder 5:3:2
Total

DV
P 15,000
( 36,875)
(P 21,875)

Total
P 9,600
48,000
P 57,600
_12,000
P 69,600
Total
P 32,000
36,000
_100,000
P168,000

2-18: a

2-19: a
JE
FR
Total
P 3,750
(P 7,500) P 11,250
( 22,125) ( 14,750) ( 73,750)
(P 18,375) (P 22,250) (P 62,500)

2-20: c
Correction of 2013 profit:
Net income per books
Understatement of depreciation
Overstatement of inventory, December 31
Adjusted net income

Distribution of net income per book:


Equally
Distribution of adjusted net income
Equally
Required Decrease

P 19,500
( 2,100)
( 11,400)
P 6,000
Pete

Rico

Total

P 9,750

P 9,750

P 19,500

( 3,000)
P 6,750

( 3,000) ( 6,000)
P 6,750 P 13,500

2-21: a
Salaries
Interest
Bonus (P360,000-P54,000)X.25
Remainder, 30:70
Total

Tiger
P 64,000
24,000
76,500
__19,650
P184,150

Woods
P100,000
30,000

__45,850
P175,850

Total
P164,000
54,000
76,500
__65,500
P360,000

24

Chapter 2

2-22: a
Holly
P 20,000

32,000
30,000
__35,640
P117,640

Salaries
Commission
Interest
Bonus, schedule 1
Remainder, 60:40
Total

Field

P 25,000
33,600

_23,760
P 82,360

Schedule 1
Net income before salary, commission,
interest and bonus
Less: salaries
Net income before bonus
Net income after bonus (P180,000/120%)
Bonus

Total
P 20,000
25,000
65,600
30,000
__59,400
P200,000

P200,000
__20,000
P180,000
_150,000
P 30,000

2-23: a
Capital balance, beginning
Additional investment
Capital withdrawal
Capital balance before profit and loss distribution

Mike
P600,000
100,000
-200,000
P500,000

Tyson
Total
P400,000 P1,000,000
200,000
300,000
( 100,000) _-300,000
P500,000 P1,000,000

Net income:
Salary
Balance, 3:2
Total
Total
Drawings
Capital balance, end

P200,000
__60,000
P260,000
P760,000
( 200,000)
P560,000

P300,000 P 500,000
__40,000 __100,000
P340,000 P 600,000
P840,000 P1,600,000
( 300,000) ( 500,000)
P540,000 P1,100,000

Average Capital - King:


Date
January 1
April 1

Capital
Balance
P40,000
55,000

Months
Unchanged
3
9
12

Peso
Months
P120,000
_495,000
P615,000

Months
Unchanged
7
5
12

Peso
Months
P700,000
__650,000
P1,350,000

Average capital P615,000/12 = P51,250


Average Capital - Queen:
Date
January 1
April 1

Capital
Balance
P100,000
130,000

Average capital - P1,350,000 / 12 =P112,500

Partnership Operations

25

2-24: d
Distribution of Net Income - Schedule 1

Interest
Bonus, Schedule 2
Salaries
Residual, 50:50
Total

King
P 5,125
12,725
25,000
( 2,050)
P40,800

Queen
P11,250

30,000
_(2,050)
P39,200

Total
P16,375
12,725
55,000
_(4,100)
P80,000

Schedule 2
Net income before allocation
Less: Interest
Net income before bonus
Net income after bonus (P63,625/125%)
Bonus

P80,000
_16,375
P63,625
_50,900
P12,725

Capital Balance December 31:


Capital balance, January 1
Additional investment
Capital balance before profit and
loss distribution
Net income (Schedule 2)
Drawings (P400 X 52)
Capital balance, December 31

King
P40,000
_15,000

Queen
P100,000
__30,000

Total
P140,000
__45,000

P55,000
40,800
( 20,800)
P75,000

P130,000
39,000
( 20,800)
P148,400

P185,000
80,000
( 41,600)
P223,400

2-25: d
Total receipts (P1,500,000 + P1,625,000)
Expenses
Net income
Distribution to Partners
Red P1,500,000/P3,125,000 X P2,045,000 =
Blue P1,625,000/P3,125,000 X P2,045,000 =

Capital balance of Blue Dec. 31


Capital Balance, Jan. 1
Additional investment
Capital balance before profit and
loss distribution
Profit share
Drawings
Capital balance, Dec. 31

P3,125,000
( 1,080,000)
P2,045,000

P 981,600 (1)
_1,063,400
P2,045,000

P 374,000
___22,000
P 396,000
1,063,400
( 750,000)
P 709,400 (2)

26

Chapter 2

2-26: a
Ray
P150,000
_______

Sam
P180,000
__60,000

Total
P330,000
__60,000

150,000

240,000

390,000

15,000
51,000

20,000
34,000

35,000
85,000

66,000

54,000

120,000

Total
Salaries

216,000
_18,000

294,000
_24,000

510,000
_42,000

Total
Drawings

234,000
(18,000)

318,000
(24,000)

552,000
(42,000)

Capital balances, March 1


Additional investment, Nov. 1
Capital balances before salaries, profit and Drawings
Profit share:
Interest
Balance, 60:40
Total

Capital balances, Feb. 28

P216,000

P294,000

P510,000

Capital balances, 1/1


Additional investment, 4/1
Capital withdrawals, 7/1

Susan
P150,000
8,000
_______

Tanny
P30,000

158,000

24,000

23,400
(1,725)

4,050
6,000
(1,725)

27,450
6,000
(3,450)

21,675

_8,325

30,000

179,675
(12,000)

32,325
(12,000)

212,000
(24,000)

2-27: a

Balances before profit distribution


Profit distribution:
Interest
Bonus (20% x P30,000)
Balance, equally
Total
Total
Drawings
Capital balances, 12/31

P167,675

Total
P180,000
8,000
(6,000) _(6,000)

P20,325

182,000

P188,000

Partnership Operations

27

2-28: a
Capital balances, beg. 1st year
Loss distribution, 1st year:
Salaries
Interest
Balance, 5:3:2
Total
Total
Drawings
Capital balances, beg. 2nd year
Profit distribution, 2nd year:
Salaries
Interest
Balance, 5:3:2
Total
Total
Drawings
Capital balances, end of 2nd year

Sin
P110,000

Tan
P80,000

Uy
P110,000

Total
P300,000

20,000
11,000
(40,000)
( 9,000)
101,000
(10,000)
91,000

8,000
(16,000)
( 8,000)
72,000
(10,000)
62,000

10,000
11,000
(24,000)
( 3,000)
107,000
(10,000)
97,000

30,000
30,000
(80,000)
(20,000)
280,000
(30,000)
250,000

20,000
9,100
( 7,500)
21,600
112,600
_(10,000)
P102,600

6,200
( 4,500)
_1,700
63,700
(10,000)
P53,700

10,000
9,700
( 3,000)
16,700
113,700
_(10,000)
P103,700

30,000
25,000
(15,000)
40,000
290,000
_(30,000)
P260,000

Jay
P30,000

Kay
P30,000

_(5,000)
25,000

_(4,000)
26,000

Loi
P30,000
5,000
______
35,000

Total
P90,000
5,000
_(9,000)
86,000

3,000
7,000
_1,000
36,000
5,000
______
41,000

3,000

3,000

_1,000
30,000

_1,000
39,000

_(3,000)
27,000

_(8,000)
31,000

9,000
7,000
__3,000
105,000
5,000
(11,000)
99,000

2-29: c
Capital balances, 1/1/11
Additional investment, 2011
Capital withdrawal, 2011
Capital balances
Profit distribution, 2011:
Interest
Salary
Balance, equally
Capital balances, 1/1/12
Additional investment, 2012
Capital withdrawal, 2012
Capital balances
Profit distribution, 2012:
Interest
Salary
Balance, equally
Capital balances, 1/1/13
Additional investment, 2013
Capital withdrawal, 2013
Capital balances
Profit distribution, 2013:
Interest
Salary
Balance, equally
Capital balances, 12/31/13 per books
Understatement of depreciation
Adjusted capital balances, 12/31/13

3,600
7,000
_1,500
53,100

3,000

3,900

_1,500
31,500

______
53,100

_(4,000)
27,500

_1,500
36,400
6,000
_(2,000)
40,400

5,310
7,000
__3,300
P68,710
(2,000)
P66,710

3,150

3,640

__3,300
P33,950
(2,000)
P31,950

__3,300
P47,340
(2,000)
P45,340

10,500
7,000
__4,500
121,000
6,000
_(6,000)
121,000
12,100
7,000
___9,900
P150,000
(6,000)
P144,000

28

Chapter 2

2-30: a
Ken
Capital balances, 1/1/12
Additional investment, 2012
Capital withdrawal, 2012
Balances
Profit distribution, 2012 (Schedule 1)
Salary
Balance, beg. Capital ratio
Capital balances, 1/1/13
Capital withdrawal, 2013

P100,000

Len

Mon

Total

P100,000

( 20,000)

P100,000
40,000
_______

_______

P300,000
40,000
( 20,000)

80,000

140,000

100,000

320,000

20,000

20,000

60,000
20,000

60,000
60,000

100,000
( 20,000)

160,000
( 40,000)

180,000
_______

440,000
( 60,000)

Balances
Profit distribution, 2013:
Salary
Balance, beg. capital ratio

80,000

120,000

180,000

380,000

__13,636

__21,818

60,000
__24,546

60,000
__60,000

Capital balances, 12/31/13

P 93,636

P141,818

P264,546

P500,000

Schedule 1 Computation of net profit:


Total capital, 2013 (P647,500 P147,500)
Total capital, 2012 (P300,000 + P40,000 P80,000)
Total profit for 2 years
Net profit per year (P240,000 / 2)

P500,000
_260,000
P240,000

P120,000

2-31: d
_Nardo_
Capital balance, 1/1/13
P280,000
Additional investment
96,000
Withdrawals
Cap. bal. before P/L dist.
376,000
NP: Salary (16,500 x 12)
Interest on EC (15%)
42,000
Balance 25:30:45
( 19,875 )
Total
22,125
Capital balance 12/31/13 P398,125

__Orly
P300,000
60,000
( 90,000 )
270,000
198,000
45,000
( 23,850 )
219,150
P 489,150

__Pedro_
P170,000
( 72,000 )
98,000
25,500
( 35,775 )
( 10,275 )
P 87,72

2-32: d
Sam capital, beginning
Additional investment (Land)
Drawings
Capital balance before net profit (loss)
Capital balance, end
Profit share (40%)
Net profit (P50,000 40%)

P120,000
60,000
( 80,000 )
100,000
150,000
50,000
P125,000

_Total_
P750,000
156,000
(162,000)
744,000
198,000
112,500
(79,500 )
231,000
P975,000

Partnership Operations

29

2-33: a
__Joe__
Capital balance, 1/2/12
P 80,000
Net loss- 2012:
Annual salary
96,000
10% interest on beg. capital
8,000
Bal. beg. cap. ratio: 8:4
( 108,000)
Total
( 4,000)
Capital balance
76,000
Drawings
( 4,000)
Capital balance, 12/31/12
72,000
Net profit- 2013:
Annual salary
96,000
10% interest on BC
7,200
Bonus to JoeNPBB
P 22000
NPAB (22000/110%)20000 2,000
Balance equally
( 67,300)
Total
37,900
Total
109,900
Drawings
(
4,000)
Capital balance, 12/31/13

__Tom__
P 40,000

__Total__
P120,000

48,000
4,000
( 54,000)
( 2,000)
38,000
( 4,000)
34,000

144,000
12,000
( 162,000)
( 6,000)
114,000
( 8,000)
106,000

48,000
3,400

144,000
10,600

( 67,300)
( 15,900)
18,100
(
4,000)

2,000
( 134,600)
22,000
128,000
( 8,000)

14,100

120,000

105,900

2-34: a
Decrease in capital
Drawings
Contribution
Profit share
Net income (45,000 30)

P 60,000
( 130,000)
25,000
45,000
P150,000

2-35: b
2-36: a

2-37:

Gabriel
Interest
P11,466.65
Bonus
12,000
Salaries
35,000
Remainder
11,280
Total
P69,747

Harry
P 5,333.36
40,000
16,920
P62,253

Partnership Operations

30

2-38: a
Thus, the entry should be:
Cash
Alma, Capital
Betty, Capital
Cora, Capital

400,000
33,600
33,600
467,200

2-39: b Note: It should be Riza instead of Rizal

2-40: a

Less:
Add:

Equity Balance
Beginning Balance
Additional Investments
Withdrawals
Remainder
Divided by
Total remainder

Romeo
P142,200
85,000
40,000
35,000
52,200
__60%
P 87,000

Remainder
Salaries
Bonus
Total Income for 2013:

P 87,000
93,000
21,750
P201,750

Bonus check:
25% (201,750-93,000-X)
=
50,437.50-23,250-0.25X
1.25X= 27,187.50
X= 21,750

31

Chapter 2

SOLUTIONS TO PROBLEMS
Problem 2 1

1.

Castro
Diaz

:
:

(P26,000/P42,500) x
(P16,500/P42,500) x

P23,800
P23,800

=
=

P14,560
__9,240
P23,800

2.

Castro
Diaz

:
:

(P31,250/P50,000) x
(P18,750/P50,000) x

P23,800
P23,800

=
=

P14,875
__8,925
P23,800

Computation of Average Capitals:


Castro:
Date
1/1 .....................................
4/10 ...................................
5/1 .....................................
8/1 .....................................

Capital
Balances
P26,000
29,000
36,000
32,000

Average capital = P375,000 12 months =


Diaz:
Date
1/1 .....................................
6/1 .....................................
9/1 .....................................

Capital
Balances
P16,500
21,500
19,500

Average capital = P225,000 12 months =


3.

Months
Unchanged
3
1
3
5
12

Peso
Months
P 78,000
29,000
108,000
_160,000
P375,000

P31,250
Months
Unchanged
5
3
4
12

Peso
Months
P 82,500
64,500
__78,000
P225,000

P18,750

Interest ........................................................
Salaries........................................................
Balance, equally..........................................
Total............................................................

Castro
P 7,500
36,000
( 24,100)
P19,400

Diaz
P4,500
24,000
(24,100)
P 4,400

Total
P12,000
60,000
( 48,200)
P23,800

Bonus (a) ....................................................


Interest (b)...................................................
Balance, 3:2 ................................................
Total............................................................

Castro
P 4,760
1,100
_10,764
P16,624

Diaz
P

_7,176
P7,176

Total
P 4,760
1,100
_17,940
P23,800

4.

Partnership Operations

32

Computations:
a. Net profit before bonus.................................................
Net profit after bonus (P23,800 125%).....................
Bonus............................................................................
b.

5.

Castro
Diaz

P23,800
_19,040
P 4,760

Average capital of Castro [(P26,000 + P32,000) 2] ...........................


Average of Diaz [(P16,500 + P18,500) 2]....... ..................................
Castro's excess..................................................... ..................................
Multiply by.......................................................... ..................................
Interest................................................................. ..................................

P29,000
_18,000
P11,000
___10%
P 1,100

:
:

P14,280
__9,520
P23,800

(P3,000/P5,000) x P23,800
(P2,000/P5,000) x P23,800

=
=

Problem 2 2

a.

Average Capital:
Robin:
Date
Jan. 1
Feb. 28
Apr. 30
Sept. 30

Balances
P135,000
95,000
175,000
195,000

Months
Unchanged
2
2
5
3
12

Peso
Months
P270,000
190,000
875,000
__585,000
P1,920,000

Months
Unchanged
3
3
2
2
2
12

Peso
Months
P420,000
600,000
300,000
440,000
__400,000
P2,160,000

Ave. Capital (P1,920,000 12) = P160,000


Hood:

Date

Balances

Jan. 1
Mar. 31
June 30
Aug. 31
Oct. 31

P140,000
200,000
150,000
220,000
200,000

Ave. Capital (P2,160,000 12) = P180,000


Profit Distribution:
Robin : P160,000 P340,000 x P510,000 =
Hood : P180,000 P340,000 x P510,000 =

P240,000
_270,000

P510,000
33

Chapter 2

b.
Interest on ave. capital .........................................
Salaries.................................................................
Bonus (P510,000 30,600 160,000) x 25%)....
Balance, equally...................................................
Totals ...................................................................
c.
Interest:
Robin (P195,000 P135,000) 10%.............
Hood (P200,000 P140,000) 10% .............
Balance, equally...................................................
Totals ...................................................................
d.

Robin
P 14,400
60,000
78,850
_119,775
P274,025

Hood
P 16,200
100,000

_119,775
P235,975

Total
P 30,600
160,000
79,850
_239,550
P510,000

Robin

Hood

Totals

P 6,000
249,000
255,000

P 12,000
498,000
510,000

Hood
P120,000

Total
P200,000
62,000
_248,000
P510,000

P 6,000
249,000
255,000
Robin
P 80,000
62,000
_124,000
P266,000

Salaries.................................................................
Bonus (see computations below) .........................
Balance, equally...................................................
_124,000
Totals ...................................................................
P244,000
Bonus Computations:
Net income before salaries and bonus......... ..................... .......................
Less Salaries................................................ ..................... .......................
Net income before bonus ............................ ..................... .......................
Net income after bonus (P310,000 125%)..................... .......................
Bonus .......................................................... ..................... .......................

P510,000
200,000
310,000
_248,000
P 62,000

Problem 2 3
a.

De Villa
P 30,000

De Vera

P 20,000
31,200
9,818
__44,182
P105,200

Salaries.................................................................
Commission (2% x P1,000,000) ..........................
Interest of 8% on average capital.........................
32,800
Bonus (see computations below) .........................
9,818
Balance, equally...................................................
__44,182
Total.....................................................................
P116,800
Bonus Computations:
Income before salary, commissions, interest & bonus...... .......................
Salary and commission (P30,000 + P20,000) ................... .......................
Interest......................................................... ..................... .......................
Income before bonus................................... ..................... .......................
Income after bonus (P108,000 110%) ..... ..................... .......................
Bonus .......................................................... ..................... .......................
b.

Income Summary.................................................

P 222,000

Total
P 30,000
20,000
64,000
19,636
__88,364
P222,000
P222,000
( 50,000)
( 64,000)
108,000
_98,182
P 9,818

De Villa, capital ..........................................


De Vera, capital...........................................

116,800
105,200

Partnership Operations

34

Problem 2 4
a.
Salaries................................................
Bonus (see computation below)..........
Interest (see computation below)........
Balance, 3:3:4 .....................................
Total....................................................

East
P15,000
3,760
2,800
__3,180
P24,740

North
P20,000

West
P18,000

4,000
__3,180
P27,180

4,800
__4,240
P27,040

Bonus computations:
Net income before bonus ........... .................... ..................... .....................
Net income after bonus (P78,960 105%)..... ..................... .....................
Bonus ......................................... .................... ..................... .....................
Interest computations:
East (10% x P28,000)................. .................... ..................... .....................
North (10% x P40,000) .............. .................... ..................... .....................
West (10% x P48,000) ............... .................... ..................... .....................
Total ........................................... .................... ..................... .....................
b.
Interest (see computations below) ......
Salaries................................................
Bonus (see computations below) ........
Balance, equally..................................
Total....................................................
Interest computations:
Average capitals:
East:
Date
1/1
5/1
9/1

Balances
P30,000
36,000
28,000

East
P 3,133
24,000
( 6,056)
P 21,077

North
P 3,633
21,000
4,280
( 6,055)
P 22,858

West
P 5,200
25,000
( 6,055)
P 24,145

Months
Unchanged
4
4
4
12

Total
P53,000
3,760
11,600
_10,600
P78,960

P78,960
_75,200
P 3,760
P 2,800
4,000
__4,800
P11,600
Total
P11,966
70,000
4,280
( 18,166)
P 68,080

Pesos
Months
P120,000
144,000
_112,000
P376,000

Average capital (P376,000 12) ..........................................

P 31,333

North:

Pesos
Months
P80,000
124,000
72,000
_160,000
P436,000

Date
1/1
3/1
7/1
9/1

Balances
P40,000
31,000
36,000
40,000

Months
Unchanged
2
4
2
4
12

Average capital (P436,000 12)...........................................

P 36,333

35

Chapter 2

West:
Date
1/1
4/1
6/1
8/1

Months
Unchanged
3
2
2
5
12

Balances
P50,000
57,000
60,000
48,000

Pesos
Months
P150,000
114,000
120,000
_240,000
P624,000

Ave. capital (P624,000 12)....................................

P 52,000

Interest Computations:
East (10% x P31,333)............ ...............................................
North (10% x P36,333) ......... ...............................................
West (10% x P52,000)........... ...............................................
Total ... .................................. ...............................................

P 3,133
3,633
__5,200
P 11,966

Bonus Computations:
Net income ............................ ...............................................
Less Salary ............................ ...............................................
Net income before bonus....... ...............................................
Net income after bonus (P47,080 110%) ...........................
Bonus to North ...................... ...............................................
* To Total
c.

East

West
P 8,990

5,000
__8,237.50
P22,227.50

Total
P 8,990
39,000
12,000
_32,950
P92,940

Bonus Computations:
Net income before salaries & bonus ............... ..................... .....................
Less Salaries (P21,000 + P18,000) ................. ..................... .....................
Net income before bonus ........... .................... ..................... .....................
Net income after bonus (P53,940 120%)..... ..................... .....................
Bonus to West ............................ .................... ..................... .....................

P92,940
_39,000
P53,940
_44,950
P 8,990

Bonus (see comp. below)....................


Salaries ...........................................
Interest on beginning capital...............
Remainder, 8:7:5.................................
Total........ ...........................................

North

P 68,000
_21,000
47,080
_42,800
P 4,280

P21,000 P 18,000
3,000
4,000
_13,180 _11,532.50
P37,180 P33,532.50

Problem 2 5
a.

Schedule of Income Distribution:


Salaries.... ...........................................
Interest (see computation on p. 30).....

Maria
P12,000
7,200

Clara
P10,000
9,600

Rita
P 8,000
13,800

Total
P30,000
30,600

Balance, equally..................................
Total........ ...........................................

__3,133
P22,333

__3,133
P22,733

__3,134
P24,934

Partnership Operations

36

Interest on Average Capital:


Maria:
P80,000 x 8% x 6 months.. ....................
P100,000 x 5% x 6 months ....................
Clara:
P120,000 x 8% .................. ....................
Rita:
P180,000 x 8% x 9 Mos. ... ....................
P150,000 x 8% x 3 Mos. ... ....................
Total ........................................... ....................
b.

__9,410
P70,000

P 3,200
__4,000

P 7,200
9,600

P10,800
__3,000

_13,800
P30,600

Statement of Partners Capital:


Balances, Jan. 1...................................
Additional Investment ........................
Capital Withdrawal.............................
Net Income..........................................
Drawings ...........................................
Balance, Dec. 31 .................................

Maria
P 80,000
20,000

22,333
( 10,000)
P112,333

Clara
P120,000

22,733
( 10,000)
P132,733

Rita
P180,000

( 30,000)
24,934
( 10,000)
P164,934

Total
P380,000
20,000
( 30,000)
70,000
( 30,000)
P410,000

Benny

Celia

Total
P20,000

Problem 2 6

1.

Allocation of net loss for 2013:


Salary to Alvin....................................
Interests on average capital:
Alvin (P120,000 x 10%) ............
Benny (P200,000 x 10%) ...........
Celia (P220,000 x 10%) .............
Balance, 30:30:40 ...............................
Total........ ...........................................

2.

Alvin
P 20,000
12,000

20,000
(29,400)
P 2,600

_(29,400)
P( 9,400)

22,000
_(39,200)
P(17,200)

54,000
_(98,000)
P(24,000)

Benny
P180,000
60,000
________
240,000
__(9,400)
230,600

Celia
P220,000
40,000
_(20,000)
240,000
_(17,200)
222,800

Total
P520,000
100,000
_(20,000)
600,000
_(24,000)
576,000

Statement of Partnership Capital


Year Ended December 31, 2013
Capitals, January 1, 2013....................
Additional investments .......................
Capital withdrawals ............................
Balances.. ...........................................
Net loss (see above) ............................
Balances.. ...........................................

Alvin
P120,000
_______
120,000
__2,600
122,600

Drawings. ...........................................
Capitals, December 31, 2013..............

_(16,000)
P106,600

_______
P230,600

_______
P222,800

37

3.

_(16,000)
P560,000
Chapter 2

Correcting entry:
Celia capital ........................................
2,400
Alvin capital...............................
2,200
Benny capital .............................
200
To correct capital accounts for error in loss allocation computed as follows:
Alvin
Benny
Celia
Correct loss allocation ........................
P2,600
P(9,400) P(17,200)
Actual loss allocation..........................
__(400)
__9,600
__14,800
Adjustment..........................................
P2,200
P 200
P ( 2,400)
Problem 2 7
Dino
P45,000
_15,000
60,000
(1,800)
(17,000)
41,200
_____
41,200
10,800
(17,000)
35,000
______
35,000
56,365
(19,000)
P72,365

Nelson
P45,000
_15,000
60,000
( 1,800)
( 7,000)
51,200
_____
51,200
8,100
( 7,000)
52,300
______
52,300
42,272
( 9,000)
P86,572

Oscar
P45,000
__6,000
51,000
( 1,800)
( 3,200)
46,000
__6,000
52,000
8,100
( 3,200)
56,900
___6,000
62,900
20,363
( 3,200)
P80,063

Total
P135,000
__36,000
171,000
( 5,400)
( 27,200)
138,400
___6,000
144,400
27,000
( 27,200)
144,200
___6,000
150,200
120,000
( 31,200)
P239,000

Dino
P48,000

3,600
_* 4,765
P56,365

Nelson
P24,000
10,909
3,600
__4,763
P43,272

Oscar
P12,000

3,600
__4,763
P20,363

Total
P84,000
10,909
10,800
__14,291
P120,000

Bonus computations:
Net income before bonus ........... ................ ..................... .....................
Net income after bonus (P120,000 110%)..................... .....................
Bonus to Nelson ......................... ................ ..................... .....................

P120,000
_109,091
P 10,909

Capital balances, 1/2/11...............................


Additional investment, 2011 .......................
Balances.......................................................
Net income (Loss) - 2011, equally ..............
Withdrawals, 2011.......................................
Capital balances, 12/31/11...........................
Additional investment, 2012 .......................
Balances.......................................................
Net income - 2012, 40: 30: 30 .....................
Withdrawals, 2012.......................................
Capital Balances, 12/31/12..........................
Additional investment, 2013 .......................
Balances.......................................................
Net income, 2013 (schedule 1)....................
Withdrawals, 2013.......................................
Capital balances, 12/31/13...........................
Schedule 1:
Annual salaries....................................
Bonus (see computations below) ........
Interest ................................................
Balance, equally..................................
Totals ..................................................

* To Total
Partnership Operations

38
Problem 2 8
Red, White & Blue Partnership
Statement of Partners' Capital
For Year Ended December 31, 2013

Balances, beginning of year


Add: 20% of fees billed to personal clients
Green's share of fees (Exhibit A)
Remaining net income (Exhibit A)
Subtotals
Less: Withdrawals
Uncollectible accounts identified
with clients of each partner
Excess rent charged to Blue
Total deductions
Balances, end of year

Red
40,200
8,800

White
20,200
4,800

Blue
40,600
4,400

_22,800
_71,800
10,400

_22,800
_47,800
8,800

_11,400
_56,400
11,600

2,400

900

P12,800
P59,000

P 9,700
P38,100

1,800
P13,400
P43,000

Green

3,200
______
__3,200
5,000

Total
P101,000
18,000
3,200
_57,000
179,200
35,800

P 5,000
P (1,800)

3,300
1,800
P 40,900
P138,300

Red, White & Blue Partnership


Exhibit A Computation and Division of Net income
For Year Ended December 31, 2013
Total revenue from fees
Expenses, excluding depreciation and doubtful
accounts expense
Less: Excess rent charged to N ($300 x 6)
Subtotal
Add: Depreciation, computed as follows:
$26,000 x 0.10
$10,000 x 0.10 x 1/2
Total expenses, excluding doubtful accounts expense
Add: Doubtful accounts expense ($3,000 x 0.60)
Total expenses
Net income for year ended Dec. 31, Year 1
Division of net income:
Fees billed to personal clients:
Red P44,000 x 20%
White P24,000 x 2%
Blue, P22,000 x 20%
Green's share of fees:
Gross fees from new clients after April 1, Year 1
Less: Allocated expenses ($40,000 x $24,000/
$120,000)
Net income from new clients
Green's share (P16,000 x 20%)
Total divided pursuant to special agreement
Balance, divided in income-sharing ratio as follows:
To Red, 40%
To White, 40%

P120,000
P38,700
__1,800
36,900
2,600
____500
P40,000
__1,800
41,800

P 8,800
48,000
4,400

________
P 78,200

P18,000

24,000
__8,000
P16,000
P 3,200
__21,200
P 57,000
P22,800
22,800

To Blue, 20%
Total

_11,400
P57,000
Chapter 2

39

Problem 2 9
Allan, Eman and Gino Partnership
Statement of Profit Distribution
Year Ended December 31, 2013
Allan

Eman

Gino

Total

Interest
Commission (P16,120 P5,000) x 10%
Balance, equally

P 4,000

__5,926

P 750
1,112
_5,925

P 250
1,112
_5,925

P 5,000
2,224
_17,776

Total
Adjustments (50% of P25,000 to Allan)

P 9,926
__2,574

P7,787
(1,287)

P7,287
(1,287)

P25,000
_____

Total

P12,500

P6,500

P6,000

P25,000

Sonny

Letty

Total

Problem 2 10

Gary, Sonny, and Letty Partnership


Statement of Partners' Capital Accounts
Year Ended December 31, 2013
Gary
Capital balances, 1/1/13
Additional investments

P210,000
___9,100

P180,000
_______

P 90,000
_______

P480,000
__9,100

Total
Profit distribution:
Salaries
Interest
Bonus to Gary and Sonny (Schedule 1)
Balance, equally

_219,100

_180,000

_90,000

489,100

10,640
10,800

13,680
25,920

__(9,720)

11,520
21,600

_(9,720)

_(9,720)

35,840
58,320

(29,160)

__29,880

_23,400

_11,720

_65,000

Total
Drawings

248,980
_(21,000)

203,400
101,720
554,100
(18,000) __(9,000) _(48,000)

Capital balances, 12/31/13

P227,980

Total

P185,400

Schedule 1: Computation of the bonus.


Net profit before interest, salaries and bonus
Less:Salaries
Interest
Net profit (loss) before bonus

P 65,000
P35,840
_58,320

__94,160
P(29,160)

P 92,720

P506,100

Therefore no bonus is to be given to Gary and Sonny.


Partnership Operations

40

Problem 2 11
a. Entries to record the formation of the partnership and the events that occurred during 2013:
Cash
Inventory
Land
Equipment
Mortgage payable
Installment note payable
Kobe, capital (P600,000 + P800,000
+ P1,000,000 P200,000)
Lebron, capital (P500,000 + P1,300,000
- P500,000)
(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Inventory
Cash
Accounts payable

1,100,000
800,000
1,300,000
1,000,000
500,000
200,000
2,200,000
1,300,000
300,000
240,000
60,000

Mortgage payable
Interest expense
Cash

50,000
20,000

Installment note payable


Interest expense
Cash

35,000
20,000

Accounts receivable
Cash
Sales

70,000

55,000
210,000
1,340,000
1,550,000

Selling and general expenses


Cash
Accrued expenses payable

340,000

Depreciation expense
Accumulated depreciation

60,000

Kobe, drawing
Lebron, drawing
Cash
Sales

278,000
62,000

60,000
104,000
104,000
208,000
1,550,000

Income summary
(9)

Cost of goods sold


Inventory
P900,000 = P800,000 beginning inventory

1,550,000
900,000
900,000

+ 300,000 purchases
- 200,000 ending inventory
41

Chapter 2

Income summary
Cost of good sold
Selling and general expenses
Depreciation expense
Interest expense

1,340,000
900,000
340,000
60,000
40,000

Income summary
Kobe, capital
Lebron, capital

210,000

Kobe, capital
Lebron, capital
Kobe, drawing
Lebron, drawing

104,000
104,000

105,000
105,000

104,000
104,000

Schedule to allocate partnership net income for 2013:

Profit percentage
Beginning capital balance
Net income (P1,550,000 revenue
- P 1,340,000 expenses)
Interest on beginning capital
balances (3%)
Salaries
Residual deficit
Total
b.

Kobe
60%
P2,200,000

Lebron
40%
P1,300,000

Total
100%
P3,500,000
210,000

66,000

39,000

120,000

120,000

(81,000)
P105,000

(54,000)
P105,000

(105,000)
P105,000
(240,000)
P(135,000)
(135,000)
-0-

Kobe-Lebron Partnership
Income Statement
For the Year Ended December 31, 2013
Sales
Less: Cost of goods sold:
Inventory, January 1
Purchases
Goods available for sale
Less: Inventory, December 31
Gross profit
Less: Selling and general expenses
Depreciation expenses
Operating income
Nonoperating expense- interest
Net income

P1,550,000
P800,000
300,000
P1,100,000
(200,000)
340,000
60,000

(900,000)
P650,000
400,000
P250,000
(40,000)
P210,000

Partnership Operations

c.

42

Kobe-Lebron Partnership
Balance Sheet
At December 31, 2013
Assets
Cash
Accounts receivable
Inventory
Land
Equipment (net)
Total assets

P1,589,000
210,000
200,000
1,300,000
940,000
P4,239,000
Liabilities and Capital

Liabilities:
Accounts payable
Accrued expenses payable
Installment note payable
Mortgage payable
Total liabilities
Capital:
Kobe, capital
Lebron, capital
Total capital
Total liabilities and capital

P60,000
62,000
165,000
450,000
P737,000
P2,201,000
1,301,000
3,502,000
P4239,000

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