Partnership Operations – Q5

6) A and B entered into a partnership as of March 1, 2020 by

1) In its first year of operations, AB and Company, a partnership, investing P75,000 and P125,000, respectively, they agreed that
made a net loss of P20,000 after providing for salaries of P5,000 A, as the managing partner, was to receive a salary P10,000 per
and P3,000 per annum for A and B, respectively, as stipulated in year; and a bonus computed at 30% of the net profit after
the partnership agreement. Capital contributions are as follows: adjustment for the salary; the balance of the profit was to be
A 30,000 B 20,000 C 10,000 distributed in the ratio of their original capital balances. On
Assuming that no profit and loss ratios are provided in the December 31, 2020, account balances were as follows:
partnership agreement and that there has been no change in the Cash 196,000 Accounts 60,000
capital contributions during the year, determine the respective payable
shares of the partners in the results of operations. Accounts receivable 67,000 A, capital 75,000
Furniture & 45,000 B, capital 125,000
2) On January 31, 2020, date of partnership formation, A and B Fixtures
have capital balances of P20,000 and P16,000, respectively. Sales returns 6,000 A, drawing (20,000)
Their partnership agreement contains a specific provision Purchases 169,000 B, drawing (30,000)
requiring the omission of interest allowances during a year of loss. Operating expenses 50,000 Sales 323,000
On July 1, 2020, A invests an additional P4,000 and B withdraws Inventories on December 31, 2020 were as follows: supplies,
P1,600. Profits and losses are divided as follows: B is the P5,200, merchandise, P37,000, prepaid insurance was P590
managing partner and as such shall receive P16,000 salary and A while accrued expenses were P5,150. Depreciation rate was 10%
shall receive P7,200; both partners shall receive interest of 7% on per year. What are the partners’ capital balances on December
their beginning capital balances to offset whatever difference in 31, 2020 after closing the net profit and drawing accounts?
capital investments they have; and any remainder shall be divided
equally. The result of AB partnership’s operations in 2020 is a 7) ABC partnership is formed by A, B, and C (industrial partner).
P9,600 loss after salary allowances. Compute for the respective The partnership agreement provided for the following distribution
shares of the partners in the results of operations. of profits and losses:
 C is to receive a monthly salary of P6,900.
3) Mr. A and his very close friend Mr. B formed a partnership on  A and B are to receive P30,000 and P40,000 interest
January 1, 2020 with A contributing P16,000 cash and B respectively.
contributing equipment with a book value of P8,000 and a fair  A, B and C are to receive 10% bonus based on net income
value of P6,400. During 2019 B made additional investments of before deductions from salary, interest and bonus.
P6,100 on April 1 and P1,600 on June 1, and on September 1, he
 The balance is to be divided in 4:5:1 ratio.
withdrew P4,000. A had no additional investments nor
For the year just ended, the partnership realized a net loss of
withdrawals during the year. What are the average capital
P520,000 before distribution to partners. Determine the respective
balances at the end of 2020 for both partners?
shares of the partners in the results of operations.
4) On January 1, 2020, A and B decided to form a partnership. At
8) A and B formed a partnership on January 2, 2020 and agreed
the end of the year, the partnership made a net income of
to share profits 85%, 15%, respectively. A contributed capital of
P210,000. The capital accounts of the partnership show the
P52,000. B contributed no capital but has a specialized expertise
following transactions:
and manages the firm full time. There were no withdrawals during
A, Capital B, Capital the year. The partnership agreement provides for the following:
Dr. Cr. Dr. Cr.  Capital accounts are to be credited annually with interest at
January 1 25,000 40,000 7% of beginning capital.
April 1 5,00  B is to be paid a salary of P1,200 a month.
0
 B is to receive a bonus of 20% of income calculated before
June 1 10,000
deducting his salary and interest on both capital accounts.
August 1 5,000
 Bonus, interest, and B’s salary are to be considered
September 1,00
partnership expenses.
1 0
The partnership 2020 income statement follows:
October 1 4,000 3,00
Revenues 96,540
0
Expenses (including salary, interest, and (47,900)
December 1 5,000 10,000
bonus)
Assuming that an interest of 10% per annum is given on average
Net income 48,640
capital and the balance of the profits is divided equally, what are
What is B’s 2020 bonus?
the profit shares of each partner?
9) On January 1, 2020, A, B, C and D formed ABCD Trading, a
5) A, B and C are partners in the accounting firm. The partnership
partnership with capital contributions as follows: A, P25,000; B,
agreement provides that salaries are allowed to the extent of the
P50,000; C, P20,000; and D, P20,000. The partnership contract
earnings only. Their capital account balances at year-end were:
provided that each partner shall receive a 3% interest on
A, P90,000; B, P110,000; C, P50,000. They share profits and
contributed capital, and that A and B shall receive salaries of
losses in a 4:4:2 ratio, after the following special terms in
P3,000 and P5,000, respectively. The contract also provided that
particular order of priority:
C shall receive a minimum of P9,200 per annum, and D a
 Salaries of P10,000 and P12,000 shall be paid to partners A minimum of P8,000 per annum, which is inclusive of amounts
and C, respectively. representing interest and share of remaining profits. The balance
 Interest of 10% shall be paid on that portion of a partner’s of the profits shall be distributed to A, B, C, and D in a 3:3:2:2
capital in excess of P100,000. ratio. What amount must be earned by the partnership, before any
 Partner C is to receive a bonus of 10% of the net income charge for interest and salaries, so that A may receive an
after bonus. aggregate of P15,200 including interest, salary and share of
Succeeding provisions are disregarded if the results of operations profits?
are already exhausted by preceding ones. Assuming a net
income of P14,000 for the year, determine the respective shares
of the partners in the results of operations.
-JMR