College of the Immaculate Conception

INSTITUTE OF HIGHER STUDIES

Department of Management, Accountancy, Technology, and Entrepreneurial Studies

PARTNERSHIP AND CORPORATION ACCOUNTING J.M. SEVILLA

ACC 1802: PARTNERSHIP OPERATION

STRAIGHT PROBLEM 1
On January 1, 2017, Candy contributed P120,000 and Noreen contributed P60,000 to
form C&N Partnership. The partnership reported (1)net income of P168,000 and (2)net
loss of P168,000 for the year 2017. Changes in the capital accounts are as follows:

Changes in Capital Accounts Candy Noreen

Capital balances, January 1, 2017 PHP 120,000.00 PHP 60,000.00
Additional investment, March 1 PHP 30,000.00
Additional investment, April 1 PHP 40,000.00
Additional investment, May 1 PHP 30,000.00
Capital withdrawal, July 1 PHP 20,000.00
Additional investment, September 1 PHP 20,000.00
Additional investment, October 1 PHP 20,000.00
Capital withdrawal, December 1 PHP 20,000.00

REQUIREMENTS:
1. How much is the share of profit of each partner at the end of the year under
the following independent situations?
a. The partners share profit and loss equally.
b. The partners agreed to share profit and loss in the ratio of 70:30
c. The partners agreed to share profit and loss in the ratio of their
capital balances
1. Beginning balances of the current year
2. Ending balances of the current year
3. Weighted balances
d. Assume that Candy and Noreen agreed that 10% interest on the average
capital is to be allowed and the remainder to be divided 60% to Candy and
40% to Noreen. This method recognizes the difference in the capital
contribution of the partners.
e. Assume that the partners agreed to allow Candy salary of P5,000 per month
for managing the partnership and the remainder equally.
f. Assume that a bonus of 20% of net income is to be credited to Noreen for
managing the partnership and the remainder 60:40 to Candy and Noreen
respectively.
g. Assume that a bonus of 20% of net income after salaries but before
interest is to be credited to Noreen. Salaries and interest agreement is
same with Situation d. and e.
h. Assume that a bonus of 20% of net income after interest but before
salaries is to be credited to Noreen. Salaries and interest agreement is
same with Situation d. and e.
i. Assume that a bonus of 20% of net income after salaries and interest is to
be credited to Noreen. Salaries and interest agreement is same with
Situation d. and e.
j. Assume that a bonus of 20% of net income after salaries, interest, and
bonus is to be credited to Noreen. Salaries and interest agreement is same
with Situation d. and e.
II. Prepare the Statement of Partners’ Capital. Use Requirement 1 (a) in
distributing net income and assume that Candy and Noreen has temporary
drawings of P30,000 and P10,000, respectively.
PARTNERSHIP AND CORPORATION ACCOUNTING page 2

STRAIGHT PROBLEM 2
Nini and Pat are partners of RC Partnership which began its first year of
operations on June 1, 2018 with the following capital balances: Nini, P1,440,000;
Pat, P720,000. According to the partnership agreement, all profits and losses will
be distributed as follows:
 Nini will be allowed an annual salary of P960,000 while Pat will be allowed a
monthly salary of P112,000.
 The partners will be allowed with interest equal to 15% of the capital
balance as of the first day of the year.
 Pat will be allowed a bonus of 12% of the net income after bonus.
 The remainder will be divided equally.
 Each partner is allowed to withdraw up to 72,000 on the first year and up to
P96,000 the following years.
Assume that the result of operations in 2018 from the date of formation is P560,000
net income and P280,000 net loss the following year. Assume further that each
partner withdraws the maximum amount from the business each period.
REQUIREMENTS:
1. How much is the share of partners Nini and Pat in the net income in 2018?
2. How much is the capital balance of each partners as of December 31, 2018?
3. How much is the share of partners Nini and Pat in the net loss in 2019?
4. How much is the capital balance of each partners as of December 31, 2019?

MCProblem 1
Ace & Barnes partnership has income of P110,000 and Partner A is to be allocated a
bonus of 10% of income after the bonus, Partner A's bonus would be
a. P11,000 c. P9,091
b. P10,000 d. P9,000

MCProblem 2
Partner A first contributed P20,000 of capital into an existing partnership on
February 1, 2018. On June 1, 2018, the partner contributed another P20,000. On
September 1, 2018, the partner withdrew P15,000 from the partnership. Withdrawals
in excess of P5,000 are charged to the partner's capital account. The partnership's
fiscal year end is December 31. The annual weighted-average capital balance is
a. P25,000 c. P28,334
b. P26,667 d. P30,000

MCProblem 3
Partner Alta had a capital balance on January 1, 2018 of P45,000 and made
additional capital contributions during 2018 totaling P50,000. During the year
2018, Alta withdrew P8,000 per month. Alta’s postclosing capital balance on
December 31, 2018 is P30,000. Alta’s share of 2018 partnership income is
a. P96,000 c. P31,000
b. P50,000 d. P8,000

MCProblem 4
Partners A and B have a profit and loss agreement with the following provisions:
salaries of P40,000 and P45,000 for A and B, respectively; a bonus to A of 10% of
net income after salaries and bonus; and interest of 15% on average capital
balances of P40,000 and P60,000 for A and B, respectively. One-third of any
remaining profits or losses are allocated to B and the balance to A. If the
partnership had net income of P52,000, how much should be allocated to Partner A?
a. P14,000 c. P38,000
b. P30,000 d. None of the above

MCProblem 5
Partners Acker, Becker & Checker have the following profit and loss agreement:
(1) Acker & Becker receive salaries of P40,000 each
(2) Checker gets a bonus of 10 percent of net income after salaries and bonus
(the bonus is zero if salaries exhaust net income)
(3) Remaining profits are shared by Acker, Becker & Checker in the following
ratios respectively: 3:4:3.
The partnership had a net income of P91,000. How much should be allocated to
Checker?
a. P3,300 c. P1,000
b. P10,300 d.P4,000
PARTNERSHIP AND CORPORATION ACCOUNTING page 3

THEORIES
1. Bob and Fred form a partnership and agree to share profits in a 2 to 1 ratio.
During the first year of operation, the partnership incurs a $20,000 loss. The
partners should share the losses
a. based on their average capital balances.
b. in a 2 to 1 ratio.
c. equally.
d. based on their ending capital balances.

2. Usually, if a partner withdraws an amount exceeding the maximum limit of the

temporary drawings, the amount in excess of the limit will be debited to the
partner’s
a. drawing account
b. retained earnings account
c. loans receivable account
d. capital account

3. A partnership agreement calls for allocation of profits and losses by salary

allocations, a bonus allocation, interest on capital, with any remainder to be
allocated by preset ratios. If a partnership has a loss to allocate, generally
which of the following procedures would be applied?
a. Any loss would be allocated equally to all partners.
b. Any salary allocation criteria would not be used.
c. The bonus criteria would not be used.
d. The loss would be allocated using the profit and loss ratios, only.

4. Salaries to partners of a partnership typically should be accounted for as

a. a means of distributing the profit.
b. drawings by the partners from the partnership.
c. reduction of capital balances.
d. all of the above.

5. A statement of changes in partners’ capital should include all of the following

except
a. Ending capital balances
b. Share of profit for the period
c. Beginning capital balances
d. Investment during the period
e. Partner’s payment of loans
f. Withdrawals during the period

6. Which of the following is not considered as legitimate expense of the

partnership?
a. Supplies used in partners’ office
b. Salaries for management hired to run the business
c. Interest paid to partners base on the amount of their invested capital
d. Depreciation on assets contributed to the partnership by the partners

7. Periodic withdrawals by partners are best viewed as

a. Distribution of partnership assets to the partners
b. Payment for partners’ personal services to the partnership
c. Expense of doing business
d. Taxable income to the partners.