.

by Prof WIN Ba/Jada

. . and Reporting _ --
13-24 I Basic Financial Ac:_0..!!'!!!..ng - _ ___,..,-- =
- -
-
SCORE:
NAME:
-
PROFESSOR:
SECTION: -
Problem #1 .
Formation and Operations of a Partnership

artnership. The partners agreed to

S M t nd Caballes forme d a P
On June 30, an a eo a . ·nvested his proprietorship's assets and
invest equal amounts of capital. San Mateo 1 .

liabil ities as follows :

San Mateo's
Fair Market
Book Value
V91ue

Accounts Receivable P 72,000 P 72,000

Allowance for Uncollectible Accounts -0- 10,500
Merchandise Inventory 223,400 241,000
Prepaid Expenses 17,000 17,000
Office Equipment 459,000 276,000
Accumulated Depreciation 153,000 -0-
Accounts Payable 191,000 191,000

On June 30, Caballes invested cash in an amount equal to the current market value of
San Mateo's partnership capital. San Mateo, the managing partner, would earn two-
thirds of partnership profits. Caballes agreed to accept one-third of the profits.

During the remainder of the year, the partnership earned P450,000. The temporary
w ithdrawals of San Mateo and Caballes were P352,000 and P230,000, respectively.

Required:

1. Journalize the partners' initial investments in a new set of books.

2. Prepare the partnersh ip's statement of financial position immediately after its
formation on June 30. ·

3. Journalize the entries to close the income summary and the drawing accounts.
 d Financial Re fo rti ng 13-25
Partnerships: Operations an ii
Zl FT Fi lZ E

I
-
aC

I SCORE:
PROFESSOR:

Problem ~2 ent
tion of Profits or Losses Based on Partners' Agreem
Distribu
of th ei r
rtn er sh ip pr of its an d losses solely on th e basis
pa
Ables and Galang divide 0 inv es ted du rin g all of 2019; Galang ha
d
Ables had P2 75 ,00
average capital balances. 31 , and he invested an ot he r P7 5,
00 0 on
nuar y 1 to Au gu st
P200,000 invested fro m Ja g 20 19 , ho w mu ch should each pa rtn er
s P800,000 du rin
September 1. If pr of it wa
receive?
 do
Basic Financial Accounting and Reporting by Prof WIN Bal/a
13-26 I

NAME:
SECTION: l
SCORE:
PROFESSOR:
j
Problem #3
of Profits or Losses Based on Partners' Agreement
Distribution
tio of
to share pr of its an d los ses ac co rd in g to th e ra
agreed
Abad, Aglugub, and Onate g of th e ye ar of P3 00 ,000, P250,000, and
ts at the beginnin
their respective investmen un de r th e fo llo wi ng condition
s: (a)
are of each pa rtn er
P450,000. Ca lculate the sh
0 loss.
P270,000 prof it; (b) P240,00
 Partnerships: Operations and Financial Reporting I 13-27

I
NAME: SCORE:
SECTION: PROFESSOR:

Problem #4
Rules for the Distribution of Profits or Losses

Baral and Malalua n are in partnership. On July 1, 2019, Castro joined the partners hip.
Profit sharing arrange ments are:

6 months to 6 months to
June 30, 2019 Dec. 31, 2019
Salaries Baral PlS,000 P25,000
Balance to be Divided: Baral 60% 40%
Malaluan 40% 40%
Castro 20%

The partners hip profit for the year ended Dec. 31, 2019 was P350,000 accruing evenly
over the year.

Required:

Prepare the profit distribut ion schedule.

 , d Reporting by Pro . --lla;;;d~a-
. -------
io,f~!:C!!_•f,'.1!;::.g_~'
13-28 I Basic Financial A~countm g an . ..:~=~~~f~ W~l:N:B~a;;;
-

SCORE:
. NAME :
PROFESSOR:
SECTION:

Problem #5
Rules for the Distribution of Profits or Losses

. • d Dems Asacta agree d to Produce and sell chocolate

tn January 2019, Nick Marasigan an . h t the business. Asacta contributed
ca ndies. Marasigan contributed P2,400,000 tn cas o d Pl 400 000 respectively. The
the bui lding and equipment, valued at P2,200,000 an 1' ;ucc~ssful during 2020
partnership had profits of P840,000 during 2019 but was ess '
when profit was only P400,000.

Required:
1. Prepare the journal entry to record the investment of both partners in the
partnership.
2. Determine the share of profit for each partner in 2019 and 2020 under each of the
following conditions :

a. The partners agreed to share profit equally.

b. The partners failed to agree on a profit-sharing arrangement.
c. The partners agreed to share profit according to the ratio of their. original
investments.
d. The partners agreed to share profits by allowing interest of 10% on their original
investments and dividing the remainder equally.
e. The partners agreed to share profits by allowing salaries of P400,000 for
Marasigan and P280,000 for Asacta, and dividing the remainder equally.
f. The partners agreed to share profits by paying salaries of P400,000 to Marasigan
and P280,000 to Asacta, allowing interest of 9% on their original investments,
and dividing the remainder equally.
 Partnerships: Operations and Financial Reporting I 13-29

-NAME: SCORE:
-SECTION:
PROFESSOR:

Problem #6
Establishing the Profit Distribution Scheme

Tria and Resulta established a consultancy partnership in 2017. They will work full time
in the firm. Tria will make an initial investment of P450,000 and Resulta, P350,000.
They are considering the _following independent schemes for the division of profits:

a. Division in the same ratio as the balances of their capital accounts.

b. 10% interest on their capital balances accounts at the beginning of the year and the
remainder to be divided equally.
c. Salary allowances of P175,000 for Tria and PlSS,000 for Resulta, 10% interest on
their capital balance at the beginning of the year, and the remainder to be divided
equally.

Required:

1. Prepare the profit distribution schedule for the above schemes assuming a: .
a. profit of PS00,000
b. profit of P240,000

2. Which profit distribution scheme is most advisable? Cite reasons.

13-30 I Basic Financial Accounting and Reporting by Prof. WIN Bailado iii

NAME:
SECTION:
SCORE:
PROFESSOR: j
Problem #7
Distribution of Profits or Losses Based on Partners' Agreement

A summary of changes in the capital accounts of the Rialubin, Rabena and Dela Cruz
partnership for 2019, before closing, follows:

Rialubin Rabena Dela Cruz Total

Balance, Jan. 1, 2019 P 80,000 P 80,000 P 90,000 P 250,000

Investment , Apr. 1 20,000 20,000
Withdrawal , May 1 {15,000) (15,000)
Withdrawa l, July 1 {10,000) {10,000)
Withdrawa l, Sept. 1 (30,000) (30,000)
P 90,000 P 65,000 P 60,000 P 215,000

Required:
Determine the ' allocation of the 2019 profit to the partners under each of the following
independe nt assumptions:

1. Profit is P48,000 and profit is divided on the basis of average capital balances.
2. Profit is PS0,000. Rialubin receives a bonus of 10% of profit for managing the
business, and the balance to be divided on the basis of beginning capital balances.

3. Loss is P35,000, each partner is allowed 10% interest on beginning capital balances,
and the balance .to be divided equally.
 _.,; .--·- wz~-ra- Partnerships: Operations and Financial Reporting I 13-31

-- NAME:
....-
SECTION:
SCORE:
...- PROFESSOR:

problem #8
Distribution of Profits or Losses Based on Partners' Agreement
1

Labasan, Gabayan, and Villanueva are manufacturers' representatives in the architecture

business. Their capital accounts were as follows:
Labasan, Capital Villanueva, Capit al
Gabayan, Capital
9/1 so,ooo I 1/1 300,ooo 3/1 90,000 I 111 400,000 s11 120,000 I 111 soo,ooo
5/1 60,000 7/1 50,000 4/1 70,000
9/1 40,000 6/1 30,000

Required:

For each of the following independent profit and loss agreement, prepare the profit
distribution schedule:

1. Salaries are PlS0,000 to Labasan, P200,000 to Gabayan, and P180,000 to Villanueva.

Labasan receives a bonus of 5% of profit after bonus. Interest is 10% of ending
capital balances. Labasan, Gabayan, and Villanueva divide any remainder in a 3:3:4
ratio. Profit was P789,600.

2. Interest is 10% of average capital balances. Salaries are P240,000 to Labasan,

P210,000 to Gabayan, and P250,000 to Villanueva. Gabayan receives a bonus of
10% ~f profit after bonus and salary. Any remainder is divided equally. Profit was
P680,800.
3. Villanueva receives a bonus of 20% of profit after bonus and salaries. Salaries are
\ p to Labasan, PlB0,000 to Gabayan, and PlS0,000 to Villanueva . Interest is
210 000
l0% 'of beginning capital balan~es. Labasan, Gabayan, and Villanueva divide any
I . d . an 8 .7 .5 ratio Profit was P929,400.
remain er in • • ·
I
I
l
I
I
 13-32 I Basic Financial Accounting and Reporting by Prof. WIN Bailado
ii

-
SCORE:
NAME:
PROFESSOR:
-
SECTION:

Problem #9
Order of Priority

On Jan. 1, 2019, the Mones, Pitular and Tuazon Partnership was formed with initial
investments by the partners as follows:

Mones P2,000,000
Pitular 1,000,00 0
Tuazon 1,000,00 0

According to the partnership agreement, profit or loss is to be divided among the

partners as follows:

1. Salaries of P120,000 for Mones, P60,000 for Pitular and P60,000 for Tuazon.
2. Interest at 5% on the original capital balances.
3. The remaind er to be divided among Mones, Pitular, and Tuazon in a ratio of 4:1 :1,
respectively.

The partners hip reported profit of P350,000 for the year ended Dec. 31, 2019.

Required:

Determi ne the partners ' share in the profit under each of the followin g independent
situations:

1. Partner's salaries and interest on capital balances should be fully allocated and any
deficiency between these allocations and profit is to be divided among Mones,
Pitular, and Tuazon in the ratio 4:1:1, respectively.

2. Partner's salaries and interest on capital balances should be made only to the extent
that the profit can provide .
 Partnerships: Operatio ns and Financia l Reporting I 13-33
-;iii ~y -- · - ,- - -r EFFZTi -

SECTION:
SCORE:
. PROFESSOR : l
problem #10
preparation of the Financial Statements

castor. Arenas an d Lau re ntet who are partners in the Super Manila NoveJty Store, share
profits in th e ratio of 30 : 20 :50. The adjuste d tria l ba lan ce on Dec . 31, 2019 follows :

O.ebits Cred its

Cash p 110,000
Accoun ts Receivable 80,000
M erch andise Invent ory 800,000
Prepa id Rent 20,000
Prepaid Insurance 15,000
Ac;coun ts Payable p 50,000
Notes Payable 115,000
Castor, Capital 125,000
Arena s, Capit al 275,000
Laurent e, Capit al 110,000
Sales 2,500,00 0
Cost of Sales 1.450,00 0
Salaries Expense 450,000
Rent Expense 200,000
Insuran ce Expense 30,000
20,000
Utilities Expense
P3,175,0 00 P3,175,0 00
Totals

Required:
1. Prepare the 2019 statem ent of finan ci al performanc e. Show th e division of profit at
the lower portion of the statem ent.
2. Prepare the statem ent of changes in partners • eq uity for 2019 . Assume the

followin g additio nal informa tion :

Investm ents W ithdrawa ls
Ca pital Accounts, during during
Jan . 1, 2019 the year the yeaf

P 50,000 ·0-
P 75,000 P',0.000
Castor 25,000
300,000 40.000
Arenas "0-
150,000
Laurente

- Prepare the statem ent of financial position as at Dec 31, 2019.

3
 I ing and Reportin g by Prof WIN Bal/ado
--~ - ~ - --=
13-34 Basic Financia l Account -- ---- .-
--- .

---
~

SCORE : ---.
NAME: PROFESSOR : --..
SECTION·:

Problem #11
Preparation of Financial Statements
31
The following are the adj usted accoun t balances o f Calamba and Santiago as at Dec.
2019: '
P 677,820
Acco unts Payable
545,070
Accoun ts Receivab le
462,870
Accumu lated Deprecia t ion- Eq uipm ent
18,790
Allowan ce for Uncollec t ible Account s
132,310
Cash 612,000
Calamba , Capita l
326,400
Ca lamba, Drawing
753,150
Equ ipment
224,880
Tran sportat ion In
149,390
General Expense s (control)
35,000
Interest Expense
M erchand ise Inventor y, Decemb er 31 1,320,42 0
Notes Payable
299,000
Prepa id Insurance 7,350
Purchase s 5,407,16 0
Purchases Discounts 43,050
Purchases Returns and Allowanc e s 259,600
Santiago, Capital 499,600
Santiago , Drawing 244,800
Sales 7,155,00 0
Sales Returns and Allowanc es 375,750
Selling Expenses (control ) 385,880

There were no changes in the partner s ' Capital accoun ts during th e year. The
mercha ndi se invento ry at the beginni ng of the year was Pl,440,.590. Th e partnership
agreem ent provide s for salary allowances of P330,000 for Calamba and P290,000 tor
th
Santiago . .It afso stipulates an interest allowance of 10% on investe d capital at e
beginning of the year, with the remainder of the profit to be divided equally .

Required :

1. Prepare an income stateme nt for the yea r. Show the division of profit.
2. Prepare a stateme nt of changes in partner s ' equity for the year.
3. Prepare a stateme nt of financiai position at the end of the year.
 Partnerships : Oper ation s and Finan cial- Repo rting I 13-3 5
- ;- . 5 -- '
-

~M E:
~cTION:
I SCORE;
PROFESSOR: l
problem #12
correction of Erro rs

Guzman prov ided that prof i ts

The partnership agre eme nt of Pangilinan, Gum ban and De
are to be divid ed as follo ws :
managing the busi ness.
, Pangilinan is to receive a salary allowance of Pl00,000 for
ces.
• Partners are to receive 10% inter est on average capital balan
:40 to Pangilinan, Gumban
• Remaining prof its are to be divided in the ratio of 30 :30
and De Guzman, respectiv.ely.

1, 2019 and had drawings of

Pangilinan had a capital balance of P600,000 at Jan .
Jan. 1, 2019 was P900,000 and
P80,000 durin g the year . Gumban's capital balance on
De Guzman's beginning capital
invested an addi tiona l P300,000 on Sept. 1, 2019 .
on July 1 but invested an
balance was Pl,1 00,0 00, and she with drew Pl00,000
additional P200,000 on Oct. 1, 2019 .

The bookkeeper allocated th e

The partn ersh ip had a loss of P120,000 during the year .
and P(74,000) to De Guzman.
loss as follo ws: P2,000 to Pangilinan; P(48,000) to Gumban

Required:
ctly .
1. Prepare the sche dule to allocate the P120,000 loss corre
.
2. Prepare the state men t of changes in partners' equity.
ming that the book s have
3. Prepare the corre cting journ al entry at Dec. 31, 2019 assu
been closed .