Chapter 2 Partnership Operations and Financial Reporting

 

CHAPTER 2 Partnership Operations and Financial Reporting   NAME: SCORE:  

SECTION: PROFESSOR:  

True or False x. 10. able The equity of a partner in the net assets of the partnership is not the same as the partner’s share in profits or losses. It is possible for a partner's capital account to increase as a result of the allocation of a loss. Salary and interest allowances are reported in the statement of comprehensive income as salaries and interest expenses. In certain cases when distribution of profits or losses involves salary and interest allowances, some partners may receive an increase in equity and others may suffer a decrease. Using average capital balances as a basis for profit distribution is preferable because it reflects the capital actually available for use by the partnership during the year. Temporary withdrawals should be considered even when they are within allowable limits. In the absence of stipulation, the share of each partner in profits or losses shall be in the same proportion to what he may have contributed, but the industrial partner may not be liable for the losses. A partnership agreement may validly stipulate that one partner shall receive no share in profits or losses. The interest on partners’ capital can be considered as expenses depending on the partners’ agreement.

 

The increase in equity of the partner due to distribution of profits can be attributed to a particular asset. When a profit or loss sharing agreement provides for salary and interest allowances to the partners, these salary and interest allowances should be deducted from revenues in arriving at partnership profit. When ending capital balances are used, additional investments during the year are encouraged.

 

a2 LS). 14. 1S: 16. a7. 18. 19: 20. 21: 22: The salary allocation to Partners also appears as salaries expense on the partnership’s statement of comprehensive income. The form those and content of the statement ofwith comprehensive income of a partnership resemble of a sole Proprietorship no exceptions. The provision for interest on Partners’ capital will not be honored because the Operations resulted to a loss even if the agreement provided for such interest. The basis for distribution of profits or losses is a matter of agreement among the Partners. It may be based on their capital contribution ratio. The income summary account is credited in the entry to record distribution of profits. Interest on loans from Partners is recognized as Partnership income. When beginning capital balances are used in allocating profits, year-end investments are discouraged. If a partnership agreement does not specify how profits or losses are to be distributed, they should be allocated based on relative capital account balances. The industrial partner is not liable for losses because he cannot withdraw the work or labor already done by him. Partnership profits and losses are divided among partners according to their sharing agreement. If no sharing agreement exists, profits or losses are divided equally. It is possible to allocate profit or loss to partners based solely on average capital balances. .

 

  NAME: SCORE:  

SECTION: PROFESSOR: Multiple Choice 1. Ceradoy, Manongsong and Anuran are partners sharing residual profits in the ratio of 3:2:1. The partnership agreement provides for 8% interest on capital and a salary for Manongsong of P80,000 per annum. Profit for 2019 was P840,000 and the yearend balances on partners’ capital accounts are as follows: Ceradoy, P200,000; -Manongsong, P150,000 and Anuran, P120,000. What was Anuran's share of residual profits for 2019? a. b. c. d.

P120,400 P126,670 P130,000 P140,000

Malaluan and Baral are in partnership. They share profits in the ratio 3:2 and close their accounts on June 30 each year.On Jan. 1, 2019, Castro joined the partnership. The profit-sharing ratio was revised to become Malaluan 50%, Baral 25% and Castro 25%, after providing for annual salaries as follows: Baral, P20,000 and Castro, P12,000. The partnership profit for the year ended June 30, 2019 was P480,000, accruing evenly over the year. What are the partners’ total share in profits for the year ended June 30, 2019? Malaluan P256,000 P248,000 P264,000 P264,000

Baral Castro P162,000 P62,000 P168,000 P64,000 P166,000 P66,000 P156,000 P60,000

aoow Refozar, Martinez and Magsino formed a partnership. It’s on a calendar year basis. The profit-sharing arrdngements are as follows: Until June 30, 2019, the annual salaries are provided as follows: Martinez, P40,000 and Magsino, P20,000. The residual profit will be shared in the ratio of 6:2:2. From July 1, 2019, the salaries will be discontinued and the profit to be divided in the revised ratio of 5:3:2.

 

Profit for the year ended Dec. 31, 2019 was P400,000 before charging partners’ salaries, accruing evenly through the year, and after charging an expense of P40,000, which it was agreed related wholly to the first six months of the year. How should the profit for the year be divided among the partners? . Refozar Martinez Magsino a. P182,000 P130,000 P88,000 b. P200,000 P116,000 P84,000  —=— = lO

 

G. P198,000 P118,000 P88,000 d. P180,000 P132,000 P88,000 Rubio and Bisana established a trading partnership. They share profits equally after allowing salaries of P40,000 per year for Rubio and interest on partner’s capital at 5% per year. On Jan. 1, 2019, their capital balances are as follows: Rubio, P200,000 and Bisana, P100,000. On July 1, 2019, Bisana invested an additional P100,000 and Rubio's salary was discontinued. The partnership profit for the year ended Dec. 31, 2019 was P337,500. What was Rubio's total profit share for the year ended Dec. 31, 2019? a. P182,500 b. P178,750 ce: P180,000 d. P190,000 Villanueva and Mulles are partners sharing profits in the ratio 3:2. On Jan. 1, 2019, Lucena joined the partnership and the new profit sharing ratio is as follows: Villanueva 40%, Mulles 30% and Lucena 30%. Profits for the year ended June 30, 2019 were: 6 months ended Dec. 31, 2018 P300,000 6 months ended June 30, 2019 P450,000 An irrecoverable debt of P50,000 was written off in the six months to June 30 in computing the P450,000 profit. It was agreed that this expense should be borne by Villanueva and Mulles only. What is Villanueva's total profit share for the year ended June 30, 2019? a. b. c. d.

P330,000 P310,000 P340,000 P350,000

Figueroa and Aguhob are partners in a CPA Review School. They share profits in the ratio of 2:1. On July 1, 2019 they admitted Figueroa's son Doblas as a partner. Figueroa guaranteed that Doblas' profit share would not be less than P25,000 for the six months to Dec. 31, 2019. The profit sharing arrangements after Doblas' admission is as follows: Figueroa 50%, Aguhob 30% and Doblas 20%. The profit for the year ended Dec.31, 2019 was P240,000 accruing evenly over the year. What should Figueroa's total profit share be for the year ended Dec. 31, 2019? a. P140,000 b. P139,000 c. P114,000 dG. -P139;375

 

  NAME: SCORE: SECTION: PROFESSOR:  

Multiple Choice 1, Which of the following best describes the nature of salary and interest allowances in a partnership profit and loss sharing agreement? a. Ameans of determining reasonable monthly withdrawals by each partner. b. The amount upon which each partner will have to pay personal income tax. c. A means distributing profit in relation to services rendered and capital invested byof partners. d. Expenses of the business that should be deducted from revenue in determining profit. 2. Astatement of changes in partners’ equity should include all of the following except a. Beginning capital balances. b. Investments during the period. c. Partner’s payments of loans. d. Withdrawals during the period. e. Ending capital balances. f. Share of profit for the period. 3. Partners Lusterio and Advincula receive a salary of P150,000 and P300,000, respectively, and share profit and losses in a 2:1 ratio, respectively. If the partnership suffered a P150,000 loss in 2019, by how much would Lusterio's account decrease? a. b. c. d.

P400,000 P250,000 P200,000 P100,000

4. Orosco is an industrial partner. Besides his services, he also contributed capital to the partnership. There is no agreement as to the distribution of profits or losses. The share of Orosco in the profit is

 

to be determined by the remaining partners. combination of c and d below. pro-rata to his contribution. such share as may be just and equitable under the circumstances. aoo9

 

10. If the partnership agreement does not specify how profit is to be allocated, profits or losses should be allocated a. equally. b. in accordance with their capital contribution. c. in proportion to the average of capital invested during the period. d. equitably so that partners are well compensated for their time and effort. Partners Manalo and Capuno receive an interest allowance of P100,000 and P150,000, respectively, and divide the remaining profits and losses in a 3:1 ratio. If the company sustained a loss of P110,000 during the year, what is the effect on Manalo's capital? a. P82,500 decrease b. P120,000 decrease c. P170,000 decrease d. P105,000 decrease Which of the following items in the property, plant, and equipment section of the statement of financial position are not depreciated? Used equipment 11-year-old building Newequipment _ Land a2oo0w What is cash flow? Cash flow = profit + depreciation + depletion Cash flow = profit - depreciation Cash flow = gross income + depreciation + depletion Cash flow = gross income - depreciation + depletion 200m The division of partnership profits on the basis of salaries, interest and an agreed ratio is usually necessary because a. this prevents arguments among the partners. b. most investors require this method of distribution. c. partners seldom contribute time, effort, and resources equally. d. this reflects the amount of time devoted to the partnership by the partners.

 

Partners De Guzman and Tugade receive a salary allowance of P30,000 and P70,000, respectively, and share the remainder equally. If the company earned P40,000 during the period, what is the effect on Tugade's capital?

 

1; AD. 13: 14. 13% P30,000 decrease P40,000 increase P50,000 increase d. P90,000 increase aoa Parducho had a P500,000 capital balance for eight months and a P650,000 balance for four months. Burgos had a P380,000 capital balance for five months and a P500,000 balance for seven months. How much of the year's P800,000 profit should Parducho receive if profits and losses are distributed based on the ratio of their average capital balances? a. P360,000 b. P387,500 c. P440,000 d. P453,200 Which of the following is not a component of the formula used to distribute profit? a. After all other allocations, the remainder divided according to the profit and loss sharing ratio. b. Salary allowances to the managing partners. Interest on the average capital investments. d. Interest on notes to partners. oO A partner has a capital balance of P400,000 for five months, P500,000 for four months, and P600,000 for three months. The average capital balance is   a. b. c. d.

P483,333. P485,000. P491,680. P500,000.

Arzadon, Ballada and Castro are partners. Their contributions are as follows: Arzadon, P600,000; Ballada, P400,000 and Castro, services. Partners Arzadon, Ballada and Castro agreed to divide profits or losses in the ratio of 35:25:40, © respectively. How should a loss of P100,000 be shared by the partners? Arzadon, P30,000; Ballada, P20,000 and Castro, P50,000. b.Arzadon, P35,000; Ballada, P25,000 and Castro, P40,000.

 

Arzadon, P35,000; Ballada, P35,000 and Castro, P30,000. Arzadon, P60,000; Ballada, P40,000 and Castro, nothing. aoo® Which of the following distributions would be made last in dividing profits to the partners when interest on capital balances and salary allowances are involved? a. Equally. b. Specified ratio.

 

16. 7: 18. 19, 205 c. Salary allowances. d. Interest on capital balances. A partner who contributes money or property as well as his work or industry to the capital of the partnership is called Industrial partner Capitalist partner Managing partner d. Capitalist-industrial partner Oo: oy Closing entries of a partnership include entries to @ record distribution of cash to the partners. b. eliminate the capital accounts and record the distribution of assets to partners to effect the partnership termination and liquidation. c. close income and expense accounts to the income summary account; and then close the profits or losses to the drawing accounts. d. close the profits or losses and dividends declared accounts to retained earnings. Arzadon, Arzadon, agree on should the loss

Ballada and Castro are partners. Their contributions are as follows: P600,000; Ballada, P400,000 and Castro, services. The partners did not how to divide profits or losses. If there is a loss of P100,000, how

Arzadon, Arzadon, Arzadon, Arzadon,

P60,000; P35,000; P35,000; P30,000;

be shared by the partners? Ballada, Ballada, Ballada, Ballada,

P40,000 P25,000 P35,000 P20,000

Qaoo0o A 1:3:2 ratio is the same as 10%:30%:20%. 1/10:3/10:2/10. c. 1/6:1/2:1/3. 20%:50%:30%. aoa

and and and and

Castro, Castro, Castro, Castro,

nothing. P40,000. . P30,000. P50,000.

 

Periodic withdrawals by partners are best viewed as a. expense of doing business. b. taxable income to the partners. c. distribution of partnership assets to the partners. d. payment for partners' personal services to the partnership.

 

2A 22. 23. 24. Pozon, Ventic and Biore are partners. Pozon is an industrial partner. During the first year of operation, the firm realized a profit of P60,000. During the second year, the firm sustained a loss of P30,000. So, the total profit for the two years of operations was only P30,000. In the Articles of Partnership, it was agreed that Pozon, the industrial partner would get one-third of the profit but would not share in the losses. How much will Pozon, the industrial partner get? Pozon will get only P10,000 which is one-third of the profit. Pozon will get only P20,000 in the first year and none in the second year. Pozon will share in the loss in the second year. Pozon will get only P20,000 which is 1/3 of the safe of the first year of operations. aoe Which of the following is not considered a legitimate expense of a partnership? Supplies used in the partners' offices. Salaries for management hired to run the business. Depreciation on assets contributed to the partnership by the partners. d. Interest paid to partners based on the amount of their invested capital. oon oa Opiso, Bombeo and Palatino are partners. Their contributions are as follows: Opiso, P600,000; Bombeo, P400,000 and Palatino, services. The partners agreed to divide profits or losses in the following percentages: Opiso, 35%; Bombeo, 25% and Palatino, 40%. If there is a profit of P100,000, how should the profit be distributed among the partners? Opiso, Opiso, Opiso, Opiso,

P35,000; P30,000; P35,000; P60,000;

Bombeo, Bombeo, Bombeo, Bombeo,

P35,000 P20,000 P25,000 P40,000

and and and and

Palatino, Palatino, Palatino, Palatino,

P30,000. P50,000. P40,000. nothing.

2925 ! The most equitable distribution of partnership profit based on capital contributions uses which of the following capital concept? Equally

 

Ending capital Beginning capital d. Average capital eo oc  

 

  NAME: SCORE:  

SECTION: PROFESSOR:  

Multiple Choice 1. Aristorenas, Soriano and Filamor have the following profit and loss agreement: * Partners Aristorenas and Soriano will receive salaries of P40,000 each. * Partner Filamor will get a bonus of 10% of profit after salaries and bonus. * Remaining profits are shared by Aristorenas, Soriano and Filamor in the ratio of 3:4:3, respectively. : The partnership had a profit of P91,000. How much should be allocated to Filamor? a. P 4,000 c.. 29,100 b. P 4,070 d. P27,300 A partnership showed the following account balances: sales, P70,000; cost of sales, P40,000; operating expenses, P10,000; partners’ salaries, P13,000; interest paid to banks, P2,000 and partners’ drawings, P8,000. The partnership profit is a. P20,000. c. P 5,000. b. P18,000. d. P(3,000). Villena, a partner in the Dulay, Villena & Co., has a 30% participation in partnership profits and losses. Villena’s capital account has a net decrease of P120,000 during the calendar year 2019. During 2019, Villena withdrew P260,000 (charged against his capital account) and contributed property valued at P50,000 to the partnership. What was the profit of the Dulay, Villena & Co. for year 2019? a. P1,100,000 CG. P700,000 b. P466,667 : d. P300,000 Marasigan, Cabance and Cequina formed a partnership on Jan. 1, 2019. Each contributed P120,000. Salaries were to be allocated as follows: Marasigan, P30,000; Cabance, P30,000; Cequina, P45,000. Drawings were equal to salaries and to be taken out evenly throughout the year. With sufficient partnership profit, Marasigan and Cabance could split a bonus equal to 25% of partnership profit after salaries and bonus (in no event could the bonus go below zero). Remaining profits were to be split as follows: 30% for Marasigan; 30% for Cabance,

 

and 40% for Cequina. For the year, partnership profit was P120,000. Compute the ending capital for each partner: Marasigan, Marasigan, Marasigan, Marasigan, aoou®

P125,100; P126,000; P125,500; P155,100;

Cabance, Cabance, Cabance, Cabance,

P125,100, P126,000, P125,500, P155,100;

Cequina, Cequina, Cequina, Cequina,

P124,800 P124,500 P124,000 P169,800

 

Del Mundo, Ballada and Mendoza are partners sharing profit on a 7:2:1 ratio. Burgos was admitted into the partnership with 15% share in profit on Jan. 1, 2019. The old partners continue to share profit in their original ratios. For the year 2019, the partnership showed a profit of P15,000. However, it was discovered that the following items were omitted in the firm’s books: Unrecorded at year-end: 2018 2019 Accrued Expense P1,050 Accrued Income : 875 Prepaid Expense P1,400 Unearned Income 15225 The share of Ballada in the 2019 profit is ae 8 P2,1977,50; c. P2,490.50. b:44P2,63 7.00. d. P3,149.75. The partnership of Ronzales, Adalem and Bio divides profits or losses in the ratio of 4:5:3. During 2019, the business earned P80,000. Bio’s share of this profit is as, P33,334. Gc. -P32,000: b. P26,667. d. P20,000. Kwong and Morales entered into a partnership as at Mar. 1, 2019 by the investing P125,000 and P75,000, respectively. They agreed that Kwong, as the managing partner, was to receive a salary of P30,000 per year and a bonus computed at 10% of the profit after adjustment for the salary; the balance of the profit was to be distributed in the ratio of their original capital balances. On Dec. 31, 2019, normal account balances were as follows: Cash P70,000 Accounts Payable P 60,000 Accounts Receivable 67,000 Kwong, Capital 125,000 Furniture & Fixtures 45,000 Morales, Capital 75,000 Sales Returns 5,000 Kwong, Drawing 20,000 Purchases 196,000 Morales, Drawing 30,000 Operating Expenses 60,000 Sales 233,000 * Inventories on Dec. 31, 2019 were as follows: supplies, P2,500, merchandise, P73,000. Prepaid insurance was P950 while accrued expenses were Pi550; Depreciation rate was 20% per year. The partners’ capital balances on Dec. 31, 2019, after closing the profit and drawing accounts, were: Kwong Morales Kwong Morales a. P135,940 P47,960 Ci P139,680 P48,680 b. P139,540 P49,860 d. P142,350 P47,670

 

10. at. The Soliman and Palaganas Partnership agreement provides for Soliman to receive a 20% bonus on profits before the bonus. Remaining profits and losses are divided between Soliman and Palaganas in the ratio of 2:3, respectively. Which partner has a greater advantage when partnership has a profit or when it has a loss?   Profit Loss a. Soliman Palaganas b. Soliman Soliman Ce Palaganas Soliman d. Palaganas Palaganas At the beginning of 2019, the statement of financial position for EasyPage Company showed the following balances in the partners’ capital accounts: Rivera, P24,000 and Rosario, P26,000. Rivera and Rosario share profits and losses in a 3:7 ratio. During 2019, EasyPage experienced a P40,000 loss. Rivera withdrew P10,000 from the partnership during the year and Rosario withdrew P18,000. What will be the balance in Rivera's capital on Dec. 31, 2019? a. P 3,600 c. P12,000 b. P 2,000 d. P26,000 On Jan. 1, 2019, Demafiles and Barbosa decided to form a partnership. At the end of the year, the partnership made a profit of P120,000. The capital accounts of the partnership showed the following transactions:   Demafiles, Capital Barbosa, Capital Dr. Gr; Dr. Cr. Jan. 1 - P40,000 - P25,000 Apr. 1 P5,000 - - June 1 - - - . 10,000 Aug. 1 - 10,000 - Sept. 1 - - P3,000 Oct - 5,000 1,000 Dec. 1 - 4,000 - 5,000 Assuming that an interest of 20% per annum is given on average capital and the balance of the profits is allocated equally, the allocation of profits should be a. Demafiles, P60,000; Barbosa, P59,400. Cc Demafiles, P67,200; Barbosa, P52,800. b. Demafiles, P61,200; Barbosa, P58,800. d. Demafiles, P68,800; Barbosa, P51,200. Barbo is a partner and has an annual salary of P24,000 but actually draws P3,000 per month. The other partner has an annual salary of P35,000 and draws P2,000 per month. What is the total annual salary that should be used to allocate profit between the partners? a. P119,000 b. P 71,000

 

23 13; 14. 15: c. P 60,000 d. P 59,000 The partnership agreement of Zuniga, Armenta & Galang provided for the year-end allocation of profit in the following order: > First, Zuniga is to receive 10% of profit up to P200,000 and 20% over P200,000. >» Second, Armenta and Galang each are to receive 5% of the remaining profit over P300,000. > _ The balance of profit is to be allocated equally among the three partners. The partnership’s 2019 profit was P500,000 before any allocations to partners. What amount should be allocated to Zuniga? a. P202,000 iG P206,000 b. P216,000 d. 220,000 Bacalso and Tenajeros have respective partnership capital balances of P48,000 and P24,000 on Jan. 1. Bacalso withdrew P6,000 on May 1 and P6,000 on July 1. Tenajeros invested an additional P12,000 on April 1 and withdrew P8,000 on Oct. 1. The average capital balances for Bacalso and Tenajeros for the year are Bacalso, Bacalso, Bacalso, Bacalso,

P48,000; P42,000; P41,000; P36,000;

Tenajeros, Tenajeros, Tenajeros, Tenajeros,

P24,000. P26,000. P31,000. P28,000.

aooo On Jan. 1, 2019, Anatalio, Yecyec, Guzon and Calimpusan formed Butuan Trading Co., a partnership, with contributions as follows: Anatalio, P50,000; Yecyec, P25,000; Guzon, P25,000 and Calimpusan, P20,000. The partnership contract provided that each partner shall receive a 5% interest on contributed capital, and that Anatalio and Yecyec shall receive salaries of P5,000 and P3,000, respectively. The contract also provided that Guzon shall receive a minimum of P2,500 per annum, and Calimpusan a minimum of P6,000 per annum, which is inclusive of - amounts representing interest and share of remaining profits. The balance of the profits shall be distributed to Anatalio, Yecyec, Guzon and Calimpusan in a ratio 3:3:2.2° What amount must be earned by the partnership, before any charge for interest and salaries, so that Anatalio may receive an aggregate of P12,500 including interest, salary and share of profits? a. uP32,333 c. P30,667 b. P30,000 d. P16,667

 

Garachico, Perez, and Burgos formed a partnership on Jan. 1, 2019, and contributed P150,000, P200,000, and P250,000, respectively. Their articles of co-partnership

 

16. Zf. provided that the operating profit be shared among the partners as follows: as salary, P24,000 for Garachico, P18,000 for Perez, and P12,000 for Burgos; interest of 12% on the average capital during 2019 of the three partners; and the balance in the ratio of 2:4:4, respectively. The operating profit for the year ended Dec. 31, 2019 amounted to P176,000. Garachico contributed additional capital of P30,000 on July 1 and made a withdrawal of P10,000 on Oct. 1; Perez contributed additional capital of P20,000 on Aug. 1 and made a withdrawal of P10,000 on Oct. 1; and, Burgos made a withdrawal of P30,000 on Nov. 1. : The partners’ capital balances on Dec. 31, 2019 are Garachico, Garachico, Garachico, Garachico,

P179,680; P223,180; P189,680; P179,760;

Perez, Perez, Perez, Perez,

P229,360; P272,060; P239,360; P229,520;

and, and, and, and,

Burgos, Burgos, Burgos, Burgos,

P239,360. P280,760. P269,360. P239,520.

ao Castillo, Labasan and Hollanes are partners with average capital balances during 2019 of P472,500, P238,650, and P162,350, respectively. The partners receive 10% interest on their average capital balances; after deducting salaries of P122,325 to Castillo and P82,625 to Hollanes, the residual profits or loss is divided equally. In 2019, the partnership had a loss of P125,624 before the interest and salaries to partners. By what amount should Castillo’s and Hollanes’ capital account change — increase (decrease)? . Castillo Hollanes Castillo Hollanes _ a. P30,267 P(40,448) G P(40,844) P3E 2355 b. P29,476 P172536 d. P 28,358 P32,458 The partnership agreement of Carlos, Niza and Usop provided for the following terms on distribution of profits and losses: * Carlos is to receive 10% of the profit up to P1,000,000 and 20% on the amount of excess; * Niza and Usop each, are to receive 5% of the remaining profit in excess of P1,500,000 after Carlos’ share as per above; * The balance to be divided equally. For the year just ended, the partnership realized a profit of P2,500,000 before distribution to partners. The share of Carlos is 2. P1,080,000. c. P1,300,000. 5. P1,000,000. d. P1,100,000.

 

18. 19) Onate, Guillermo and Cumagun are partners sharing profits on a 5:3:2 ratio. On Jan. 1, 2019, Aglugob was admitted into the partnership with a 10% share in profits. The old partners continue to participate in profits in their original ratio. For 2019, the profit of the partnership was reported as P12,500. However, it was discovered that the following items were omitted in the firm’s books: Unrecorded at year-end 2018 2019 Prepaid Expense P800 Accrued Expense P600 Unearned Income 700 Accrued Income 500 The new profit and loss ratio for Guillermo, and the share of partner Cumagun in the 2019 profit would be a. 30% and P2,214. c. 27% and P2,286. b. 27% and P2,214. ; d. 30% and P2,286. Perez, Yuzon and Mercado formed a partnership on Jan. 1, 2019 with the following initial investments: Perez - P100,000 Yuzon - 150,000 Mercado - 225,000 The partnership agreement states that profits and losses are to be shared equally by the partners after consideration is made for the following: - Salaries allowed to partners: P60,000 for Perez, P48,000 for Yuzon and P36,000 for Mercado. - Average partner’s capital balances during the year shall be allowed 10% interest. Additional information: - OnJune 30, 2019, Perez invested an additional P60,000. - Mercado withdrew P70,000 from the partnership on Sept. 30, 2019. - Share on the remaining partnership profits was P5,000 for each partner. The total partnership capital on Dec. 31, 2019 was a. P405,000. CG P672,750. b. P671,500. d. P480,000.

 

 

NAME: SCORE:  

SECTION: PROFESSOR:  

Problem #5 Distribution of Profits or Losses Based on Partners’ Agreement Abad, Aglugub, and Onate agreed to share profits and losses according to the ratio of their respective investments at the beginning of the year of P300,000, P250,000, and P450,000. Calculate the share of each partner under the following conditions: (a) P270,000 profit; (b) P240,000 loss. Problem #6 Distribution of Profits or Losses Based on Partners’ Agreement Orosco and Castillo divide partnership profits and losses solely on the basis of their average capital balances. Orosco had P450,000 invested during all of 2019; Castillo had P300,000 invested from January 1 to September 30, and he invested another P200,000 on October 1. If profit was P2,000,000 during 2019, how much should each partner receive?