20 Chapter 2
CHAPTER 2
MULTIPLE CHOICE ANSWERS AND
SOLUTIONS
2-1: d
Jordan Pippen Total
Annual salary P120,000 P80,000 P200,000
Balance, equally ( 10,000) ( 10,000) ( 20,000)
Total P110,000 P 70,000 P180,000
2-2: a
JJ KK LL Total
Bonus (.20 X P90,000) P18,000 – – P 18,000
Interest
JJ (.15 X P100,000) P15,000 – –)
KK (.15 X P200,000) P 30,000 –)
LL (.15 X P300,000) P45,000) 90,000
Balance, equally ( 6,000) ( 6,000) ( 6,000) ( 18,000)
Total profit share P27,000 P 24,000 P39,000 P 90,000
2-3: a
2-4: a
Allan Michael Total
Interest
Allan - .10 X (P40,000 +
60,000 /2) P 5,000 )
Michael - .10 X (P60,000 +
70,000/2) P 6,500) P 11,500
Balance, equally _14,000 _14,000 __28,000
Total P 19,000 P20,500 P 28,000
2-5: a
Fred Greg Henry Total
Interest (.10 of average capital) P12,000 P 6,000 P 4,000 P 22,000
Salaries 30,000 20,000 50,000
Balance, equally ( 35,000) ( 35,000) ( 35,000) (105,000)
Total P 7,000 ( P29,000) (P11,000) (P 33,000)
2-6: b
Average Capital
Capital Months Peso
Date Balance Unchanged Months
January 1 140,000 6 P 840,000
July 1 180,000 1 180,000
August 1 165,000 5 __825,000
12 P1,845,000
Average capital - P1,845,000/12 = P153,750
Interest (P153,750 X 10%) = P
15,375
Partnership Operations
21
2-7: c
Capital Months Peso
Date Balance Unchanged Months
January 1 P16,000 3 P 48,000
April 1 17,600 2 35,200
June 1 19,200 3 57,600
September 1 15,200 4 __60,800
12 P201,600
Average Capital (P201,600/12) = P16,800
2-8: a
Net profit before bonus P 24,000
Net profit after bonus
(P24,000/120%) __20,000
Bonus to RJ 4,000
Balance (P24,000-P4,000)X3/5 __12,000
Total profit share P 16,000
2-9: a
LT AM Total
Interest P3,200 P 3,600 P 6,800
Salaries 15,000 7,500 22,500
Balance, 3:2 (11,580) ( 7,720) ( 19,300)
Total P 6,620 P 3,380 P 10,000
2-10: b
Net income after salary, interest and bonus P467,500
Add back: Salary (P10,000 X 12) P120,000
Interest (P250,000 X .05) __12,500 _132,500
Net income after bonus (80%) P600,000
Net income before bonus
(P600,000/80%) _750,000
Paul's bonus P150,000
2-11: b
CC DD EE Total
Salary P 14,000 P 14,000
Balance P14,000 P 8,400 5,600 28,000
Additional profit to DD ( 1,500) __2,100 ( 600) ______–
Total P12,500 P10,500 P 19,000 P 42,000
Net
income
Fees Earned P90,000
Expenses _48,000
Net
Income P42,000
22 Chapter 2
2-12: c
LL MM NN Total
Interest P 2,000 P 1,250 P 750 P 4,000
Annual Salary 8,500 – – 8,500
Additional profit to give LL,
P20,000 9,500 5,700 3,800 19,000*
Additional profit to give MM,
P14,000 _____– __7,050 _____– __7,050
Total P20,000 P14,000 P 4,550 P 38,550
*(P9,500/50%) = P19,000
2-13: a
RR SS TT Total
Excess (Deficiency)
RR (P80,000 - P95,000) P15,000 – –)
SS (P50,000 - P40,000) – (P10,000) –) P 5,000
Balance 4:3:1 _47,500 _35,625 _11,875 __95,000
Total P62,500 P25,625 P11,875 P100,000
Net
Income (200,000 - 100,000) = P100,000
2-14: b AA BB CC Total
AA - 100,000 X 10% P 10,000 )
150,000 X 20% 30,000 ) P 40,000
Remainder, 210,000
BB (60,000 X .05) P 3,000 )
CC (60,000 X .05) P 3,000 6,000
Balance, equally __68,000 _68,000 _68,000 _204,000
Total P108,000 P71,000 P71,000 P250,000
2-15: a
AJ BJ CJ Total
Bonus to CJ
Net profit before bonus P44,000
Net profit after bonus (P44,000/110%)P40,000 – – P4,000 P4,000
Interest to BJ – P1,000 – 1,000
Salaries P 10,000 – 12,000 22,000
Balance, 4:4:2 __6,800 _6,800 __3,400 _17,000
Total P 16,800 P7,800 P19,400 P44,000
2-16: c
Total profit share of Pedro P200,000
Less: Salary to Pedro P 50,000
Interest __20,000 __70,000
Share in the balance (40%) P130,000
Net profit after salary and
interest (130,000/40%) P325,000
Add: Total Salaries P150,000
Total Interest __70,000 _220,000
Total Partnership Income P545,000
Partnership Operations
23
2-17: c
Net income before extraordinary gain and bonus (69,600-12,000) P 57,600
Net income after bonus
(57,600/120%) _48,000
Bonus to RR P 9,600
Distribution of Net Income:
JJ RR Total
Bonus – P 9,600 P 9,600
Balance, equally P 24,000 24,000 48,000
Net profit before extraordinary
gain P 24,000 P 33,600 P 57,600
Extraordinary gain __4,800 __7,200 _12,000
Total P 28,800 P 40,800 P 69,600
2-18: a
Mel Jay Total
Interest P 20,000 P 12,000 P 32,000
Annual Salary 36,000 – 36,000
Remainder 60:40 __60,000 _40,000 _100,000
Total P116,000 P 52,000 P168,000
2-19: a
DV JE FR Total
Interest on excess (Deficiency) P 15,000 P 3,750 (P 7,500) P 11,250
Remainder 5:3:2 ( 36,875) ( 22,125) ( 14,750) ( 73,750)
Total (P 21,875) (P 18,375) (P 22,250) (P 62,500)
2-20: c
Correction of 1998 profit:
Net income per books P 19,500
Understatement of depreciation ( 2,100)
Overstatement of inventory,
December 31 ( 11,400)
Adjusted net income P 6,000
Pete Rico Total
Distribution of net income per book:
Equally P 9,750 P 9,750 P 19,500
Distribution of adjusted net
income
Equally ( 3,000) ( 3,000) ( 6,000)
Required Decrease P 6,750 P 6,750 P 13,500
2-21: a
Tiger Woods Total
Salaries P 64,000 P100,000 P164,000
Interest 24,000 30,000 54,000
Bonus (P360,000-P54,000)X.25 76,500 – 76,500
Remainder, 30:70 __19,650 __45,850 __65,500
Total P184,150 P175,850 P360,000
24 Chapter 2
2-22: a
Holly Field Total
Salaries P 20,000 – P 20,000
Commission – P 25,000 25,000
Interest 32,000 33,600 65,600
Bonus, schedule 1 30,000 – 30,000
Remainder, 60:40 __35,640 _23,760 __59,400
Total P117,640 P 82,360 P200,000
Schedule 1
Net income before salary,
commission,
interest and bonus P200,000
Less: salaries __20,000
Net income before bonus P180,000
Net income after bonus
(P180,000/120%) _150,000
Bonus P 30,000
2-23: a
Mike Tyson Total
Capital balance, beginning P600,000 P400,000 P1,000,000
Additional investment 100,000 200,000 300,000
Capital withdrawal -200,000 ( 100,000) _-300,000
Capital balance before profit and
loss distribution P500,000 P500,000 P1,000,000
Net income:
Salary P200,000 P300,000 P 500,000
Balance, 3:2 __60,000 __40,000 __100,000
Total P260,000 P340,000 P 600,000
Total P760,000 P840,000 P1,600,000
Drawings ( 200,000) ( 300,000) ( 500,000)
Capital balance, end P560,000 P540,000 P1,100,000
Average
Capital - King:
Capital Months Peso
Date Balance Unchanged Months
January 1 P40,000 3 P120,000
April 1 55,000 9 _495,000
12 P615,000
Average capital – P615,000/12 = P51,250
Average
Capital - Queen:
Capital Months Peso
Date Balance Unchanged Months
January 1 P100,000 7 P700,000
April 1 130,000 5 __650,000
12 P1,350,000
Average capital - P1,350,000 / 12
= P112,500
Partnership Operations
25
2-24: d
Distribution of Net Income - Schedule 1
King Queen Total
Interest P 5,125 P11,250 P16,375
Bonus, Schedule 2 12,725 – 12,725
Salaries 25,000 30,000 55,000
Residual, 50:50 ( 2,050) _(2,050) _(4,100)
Total P40,800 P39,200 P80,000
Schedule 2
Net income before allocation P80,000
Less: Interest _16,375
Net income before bonus P63,625
Net income after bonus
(P63,625/125%) _50,900
Bonus P12,725
Capital Balance December 31:
King Queen
Total
Capital balance, January 1 P40,000 P100,000 P140,000
Additional investment _15,000 __30,000 __45,000
Capital balance before profit
and
loss distribution P55,000 P130,000 P185,000
Net income (Schedule 2) 40,800 39,000 80,000
Drawings (P400 X 52) ( 20,800) ( 20,800) ( 41,600)
Capital balance, December 31 P75,000 P148,400 P223,400
2-25: d
Total receipts (P1,500,000 + P1,625,000) P3,125,000
Expenses ( 1,080,000)
Net income P2,045,000
Distribution to Partners
Red – P1,500,000/P3,125,000 X
P2,045,000 = P 981,600 (1)
Blue – P1,625,000/P3,125,000 X
P2,045,000 = _1,063,400
P2,045,000
Capital balance of Blue Dec. 31
Capital Balance, Jan. 1 P 374,000
Additional investment ___22,000
Capital balance before profit
and
loss distribution P 396,000
Profit share 1,063,400
Drawings ( 750,000)
Capital balance, Dec. 31 P 709,400 (2)
26 Chapter 2
2-26: a
Ray Sam Total
Capital balances, March 1 P150,000 P180,000 P330,000
Additional investment, Nov. 1 _______ __60,000 __60,000
Capital balances before
salaries, profit and Drawings 150,000 240,000 390,000
Profit share:
Interest 15,000 20,000 35,000
Balance, 60:40 51,000 34,000 85,000
Total 66,000 54,000 120,000
Total 216,000 294,000 510,000
Salaries _18,000 _24,000 _42,000
Total 234,000 318,000 552,000
Drawings (18,000) (24,000) (42,000)
Capital balances, Feb. 28 P216,000 P294,000 P510,000
2-27: a
Susan Tanny Total
Capital balances, 1/1 P150,000 P30,000 P180,000
Additional investment, 4/1 8,000 8,000
Capital withdrawals, 7/1 _______ (6,000) _(6,000)
Balances before profit
distribution 158,000 24,000 182,000
Profit distribution:
Interest 23,400 4,050 27,450
Bonus (20% x P30,000) 6,000 6,000
Balance, equally (1,725) (1,725) (3,450)
Total 21,675 _8,325 30,000
Total 179,675 32,325 212,000
Drawings (12,000) (12,000) (24,000)
Capital balances, 12/31 P167,675 P20,325 P188,000
Partnership Operations 27
2-28: a
Sin Tan Uy Total
Capital balances, beg. 1st year P110,000 P80,000 P110,000 P300,000
Loss distribution, 1st
year:
Salaries 20,000 10,000 30,000
Interest 11,000 8,000 11,000 30,000
Balance,
5:3:2 (40,000) (16,000) (24,000) (80,000)
Total (
9,000) ( 8,000) ( 3,000) (20,000)
Total 101,000 72,000 107,000 280,000
Drawings (10,000) (10,000) (10,000) (30,000)
Capital balances, beg.
2nd year 91,000 62,000 97,000 250,000
Profit distribution, 2nd
year:
Salaries 20,000 10,000 30,000
Interest 9,100 6,200 9,700 25,000
Balance,
5:3:2 ( 7,500) ( 4,500) ( 3,000) (15,000)
Total 21,600 _1,700 16,700 40,000
Total 112,600 63,700 113,700 290,000
Drawings _(10,000) (10,000) _(10,000) _(30,000)
Capital balances, end of
2nd year P102,600 P53,700 P103,700 P260,000
2-29: c
Jay Kay Loi Total
Capital balances, 1/1/06 P30,000 P30,000 P30,000 P90,000
Additional investment,
2006 5,000 5,000
Capital withdrawal, 2006 _(5,000) _(4,000) ______ _(9,000)
Capital balances 25,000 26,000 35,000 86,000
Profit distribution,
2006:
Interest 3,000 3,000 3,000 9,000
Salary 7,000 7,000
Balance,
equally _1,000 _1,000 _1,000 __3,000
Capital balances, 1/1/07 36,000 30,000 39,000 105,000
Additional investment,
2007 5,000 5,000
Capital withdrawal, 2002 ______ _(3,000) _(8,000) (11,000)
Capital balances 41,000 27,000 31,000 99,000
Profit distribution,
2007:
Interest 3,600 3,000 3,900 10,500
Salary 7,000 7,000
Balance,
equally _1,500 _1,500 _1,500 __4,500
Capital balances, 1/1/08 53,100 31,500 36,400 121,000
Additional investment,
2008 6,000 6,000
Capital withdrawal, 2008 ______ _(4,000) _(2,000) _(6,000)
Capital balances 53,100 27,500 40,400 121,000
Profit distribution,
2008:
Interest 5,310 3,150 3,640 12,100
Salary 7,000 7,000
Balance,
equally __3,300 __3,300 __3,300 ___9,900
Capital balances, 12/31/08 per books P68,710 P33,950 P47,340 P150,000
Understatement of
depreciation (2,000) (2,000) (2,000) (6,000)
Adjusted capital
balances, 12/31/08 P66,710 P31,950 P45,340 P144,000
28 Chapter 2
2-30: a
Ken Len Mon Total
Capital balances, 1/1/07 P100,000 P100,000 P100,000 P300,000
Additional investment, 2007 40,000 40,000
Capital withdrawal, 2007 ( 20,000) _______ _______ ( 20,000)
Balances 80,000 140,000 100,000 320,000
Profit distribution, 2007
(Schedule 1)
Salary 60,000 60,000
Balance, beg. Capital
ratio 20,000 20,000 20,000 60,000
Capital balances, 1/1/08 100,000 160,000 180,000 440,000
Capital withdrawal, 2008 ( 20,000) ( 40,000) _______ ( 60,000)
Balances 80,000 120,000 180,000 380,000
Profit distribution, 2008:
Salary 60,000 60,000
Balance, beg. capital
ratio __13,636 __21,818 __24,546 __60,000
Capital balances, 12/31/08 P 93,636 P141,818 P264,546 P500,000
Schedule 1 – Computation of
net profit:
Total capital, 2008 (P647,500 – P147,500) P500,000
Total capital, 2007
(P300,000 + P40,000 – P80,000) _260,000
Total profit for 2
years P240,000
Net profit per year (P240,000 / 2) P120,000
2-31: d
_Nardo_ __Orly __Pedro_ _Total_
Capital
balance, 1/1/08 P280,000 P300,000 P170,000 P750,000
Additional investment
96,000 60,000 - 156,000
Withdrawals ( 90,000 ) ( 72,000 )
(162,000)
Cap. bal. before P/L dist.
376,000 270,000 98,000 744,000
NP: Salary (16,500 x 12) - 198,000 -
198,000
Interest on EC (15%) 42,000 45,000 25,500 112,500
Balance 25:30:45 ( 19,875 ) (
23,850 ) ( 35,775 )
(79,500 )
Total 22,125 219,150 ( 10,275 )
231,000
Capital balance 12/31/08 P398,125 P 489,150 P
87,72 P975,000
2-32: d
Sam capital, beginning P120,000
Additional investment (Land) 60,000
Drawings ( 80,000 )
Capital balance before net
profit (loss) 100,000
Capital balance, end
150,000
Profit share (40%) 50,000
Net profit (P50,000 ÷ 40%) P125,000
Partnership Operations
29
2-33: a
__Joe__ __Tom__ __Total__
Capital balance, 1/2/07 P 80,000 P 40,000 P120,000
Net loss- 2007:
Annual salary 96,000 48,000 144,000
10% interest on beg.
capital 8,000 4,000 12,000
Bal. beg. cap. ratio:
8:4 ( 108,000) (
54,000) ( 162,000)
Total ( 4,000) ( 2,000) ( 6,000)
Capital balance 76,000 38,000 114,000
Drawings ( 4,000) ( 4,000) ( 8,000)
Capital balance, 12/31/07 72,000 34,000 106,000
Net profit- 2008:
Annual salary 96,000 48,000 144,000
10% interest on BC 7,200
3,400 10,600
Bonus to Joe–NPBB – P
22000
NPAB (22000/110%)20000
2,000 2,000
Balance equally ( 67,300) ( 67,300) (
134,600)
Total 37,900 ( 15,900) 22,000
Total 109,900 18,100 128,000
Drawings ( 4,000) ( 4,000) ( 8,000)
Capital balance, 12/31/08
105,900 14,100 120,000
2-34: a
Decrease in capital P
60,000
Drawings (
130,000)
Contribution 25,000
Profit share 45,000
Net income (45,000 ÷ 30) P150,000
30 Chapter 2
SOLUTIONS TO PROBLEMS
Problem 2 – 1
1. Castro : (P26,000/P42,500) x P23,800 = P14,560
Diaz : (P16,500/P42,500) x P23,800 = __9,240
P23,800
2. Castro : (P31,250/P50,000) x P23,800 = P14,875
Diaz : (P18,750/P50,000) x P23,800 = __8,925
P23,800
Computation of Average Capitals:
Castro: Capital Months Peso
Date Balances Unchanged Months
1/1................................... P26,000 3 P 78,000
4/10................................. 29,000 1 29,000
5/1................................... 36,000 3 108,000
8/1................................... 32,000 5 _160,000
12 P375,000
Average capital =
P375,000 ¸ 12 months = P31,250
Diaz: Capital Months Peso
Date Balances Unchanged Months
1/1................................... P16,500 5 P 82,500
6/1................................... 21,500 3 64,500
9/1................................... 19,500 4 __78,000
12 P225,000
Average capital =
P225,000 – 12 months = P18,750
3. Castro Diaz Total
Interest.................................................... P 7,500 P4,500 P12,000
Salaries.................................................... 36,000 24,000 60,000
Balance, equally....................................... ( 24,100) (24,100) ( 48,200)
Total........................................................ P19,400 P
4,400 P23,800
4. Castro Diaz Total
Bonus
(a)................................................ P 4,760 P – P 4,760
Interest (b).............................................. 1,100 – 1,100
Balance, 3:2............................................. _10,764 _7,176 _17,940
Total........................................................ P16,624 P7,176 P23,800
Partnership Operations
31
Computations:
a. Net profit
before bonus............................................. P23,800
Net profit after bonus (P23,800
¸ 125%)................. _19,040
Bonus...................................................................... P 4,760
b. Average capital of Castro [(P26,000 + P32,000) ¸ 2]...................... P29,000
Average of Diaz [(P16,500
+ P18,500) ¸ 2].................................... _18,000
Castro's excess................................................................................ P11,000
Multiply by....................................................................................... ___10%
Interest............................................................................................ P 1,100
5. Castro : (P3,000/P5,000) x P23,800 = P14,280
Diaz : (P2,000/P5,000) x P23,800 = __9,520
P23,800
Problem
2 – 2
a. Average
Capital:
Robin: Date Balances Months Peso
Unchanged Months
Jan. 1 P135,000 2 P270,000
Feb. 28 95,000 2 190,000
Apr. 30 175,000 5 875,000
Sept. 30 195,000 3 __585,000
12 P1,920,000
Ave. Capital (P1,920,000 ¸ 12) = P160,000
Hood: Date Balances Months Peso
Unchanged Months
Jan. 1 P140,000 3 P420,000
Mar. 31 200,000 3 600,000
June 30 150,000 2 300,000
Aug. 31 220,000 2 440,000
Oct. 31 200,000 2 __400,000
12 P2,160,000
Ave. Capital (P2,160,000 ¸ 12) = P180,000
Profit Distribution:
Robin : P160,000
¸ P340,000 x P510,000 = P240,000
Hood : P180,000
¸ P340,000 x P510,000 = _270,000
P510,000
32 Chapter
2
b. Robin Hood Total
Interest
on ave. capital...................................... P 14,400 P 16,200 P 30,600
Salaries............................................................ 60,000 100,000 160,000
Bonus (P510,000 – 30,600 – 160,000) x
25%).... 78,850 – 79,850
Balance, equally............................................... _119,775 _119,775 _239,550
Totals.............................................................. P274,025 P235,975 P510,000
c. Robin Hood Totals
Interest:
Robin (P195,000 – P135,000) 10%............ P 6,000
Hood (P200,000 – P140,000) 10%............. P 6,000 P 12,000
Balance, equally............................................... 249,000 249,000 498,000
Totals.............................................................. 255,000 255,000 510,000
d. Robin Hood Total
Salaries............................................................ P 80,000 P120,000 P200,000
Bonus (see computations below)....................... 62,000 62,000
Balance, equally............................................... _124,000 _124,000 _248,000
Totals.............................................................. P266,000 P244,000 P510,000
Bonus
Computations:
Net income before salaries and
bonus.................................................. P510,000
Less Salaries...................................................................................... 200,000
Net income before bonus.................................................................... 310,000
Net income after bonus (P310,000
¸ 125%)......................................... _248,000
Bonus................................................................................................ P 62,000
Problem 2 – 3
a. De
Villa De Vera Total
Salaries............................................................ P 30,000 – P 30,000
Commission (2% x P1,000,000)......................... P 20,000 20,000
Interest of 8% on average capital...................... 32,800 31,200 64,000
Bonus (see computations below)....................... 9,818 9,818 19,636
Balance, equally............................................... __44,182 __44,182 __88,364
Total ............................................................... P116,800 P105,200 P222,000
Bonus
Computations:
Income before salary,
commissions, interest & bonus............................ P222,000
Salary and commission (P30,000 +
P20,000)......................................... ( 50,000)
Interest.............................................................................................. ( 64,000)
Income before bonus.......................................................................... 108,000
Income after bonus (P108,000 ¸ 110%)............................................... _98,182
Bonus................................................................................................ P 9,818
b. Income
Summary............................................. P 222,000
De Villa, capital........................................ 116,800
De Vera, capital....................................... 105,200
Partnership Operations 33
Problem 2 – 4
a. East North West Total
Salaries............................................ P15,000 P20,000 P18,000 P53,000
Bonus (see computation below)......... 3,760 3,760
Interest (see computation below)....... 2,800 4,000 4,800 11,600
Balance, 3:3:4................................... __3,180 __3,180 __4,240 _10,600
Total ............................................... P24,740 P27,180 P27,040 P78,960
Bonus
computations:
Net income before bonus...................................................................... P78,960
Net income after bonus (P78,960 ¸ 105%)............................................. _75,200
Bonus.................................................................................................. P 3,760
Interest
computations:
East (10% x P28,000)........................................................................... P 2,800
North (10% x P40,000)......................................................................... 4,000
West (10% x P48,000).......................................................................... __4,800
Total.................................................................................................... P11,600
b. East North West Total
Interest (see computations below)..... P
3,133 P 3,633 P 5,200 P11,966
Salaries............................................ 24,000 21,000 25,000 70,000
Bonus (see computations below)....... 4,280 4,280
Balance, equally............................... ( 6,056) ( 6,055) ( 6,055) ( 18,166)
Total ............................................... P 21,077 P 22,858 P 24,145 P 68,080
Interest
computations:
Average capitals:
East: Months Pesos
Date Balances Unchanged Months
1/1 P30,000 4 P120,000
5/1 36,000 4 144,000
9/1 28,000 4 _112,000
12 P376,000
Average capital
(P376,000 ¸ 12) ...................................... P 31,333
North: Months Pesos
Date Balances Unchanged Months
1/1 P40,000 2 P80,000
3/1 31,000 4 124,000
7/1 36,000 2 72,000
9/1 40,000 4 _160,000
12 P436,000
Average capital
(P436,000 ¸ 12)....................................... P
36,333
34 Chapter 2
West: Months Pesos
Date Balances Unchanged Months
1/1 P50,000 3 P150,000
4/1 57,000 2 114,000
6/1 60,000 2 120,000
8/1 48,000 5 _240,000
12 P624,000
Ave. capital
(P624,000 ¸ 12)................................. P 52,000
Interest Computations:
East (10% x P31,333)....................................................... P 3,133
North (10% x P36,333)..................................................... 3,633
West (10% x P52,000)...................................................... __5,200
Total................................................................................ P 11,966
Bonus Computations:
Net income...................................................................... P 68,000
Less Salary...................................................................... _21,000
Net income before bonus.................................................. 47,080
Net income after bonus
(P47,080 ¸ 110%)......................... _42,800
Bonus to North................................................................. P 4,280
* To Total
c. East North West Total
Bonus
(see comp. below).................. P 8,990 P 8,990
Salaries ....................................... P21,000 P 18,000 – 39,000
Interest on beginning capital.............. 3,000 4,000 5,000 12,000
Remainder, 8:7:5............................... _13,180 _11,532.50 __8,237.50 _32,950
Total ............................................... P37,180 P33,532.50 P22,227.50 P92,940
Bonus
Computations:
Net income before salaries &
bonus...................................................... P92,940
Less Salaries (P21,000 + P18,000)......................................................... _39,000
Net income before bonus...................................................................... P53,940
Net income after bonus (P53,940 ¸ 120%)............................................. _44,950
Bonus to West..................................................................................... P
8,990
Problem 2 – 5
a. Schedule of Income Distribution:
Maria Clara Rita Total
Salaries............................................ P12,000 P10,000 P 8,000 P30,000
Interest (see computation on p. 30).... 7,200 9,600 13,800 30,600
Balance, equally............................... __3,133 __3,133 __3,134 __9,410
Total ............................................... P22,333 P22,733 P24,934 P70,000
Partnership Operations
35
Interest on Average Capital:
Maria:
P80,000 x 8% x 6 months...................... P 3,200
P100,000 x 5% x 6 months.................... __4,000 P 7,200
Clara:
P120,000 x 8%..................................... 9,600
Rita:
P180,000 x 8% x 9 Mos........................ P10,800
P150,000 x 8% x 3 Mos........................ __3,000 _13,800
Total ........................................................... P30,600
b. Statement of Partners Capital:
Maria Clara Rita Total
Balances,
Jan. 1............................... P 80,000 P120,000 P180,000 P380,000
Additional Investment....................... 20,000 – – 20,000
Capital Withdrawal........................... – – ( 30,000) ( 30,000)
Net Income...................................... 22,333 22,733 24,934 70,000
Drawings ....................................... ( 10,000) ( 10,000) ( 10,000) ( 30,000)
Balance, Dec. 31.............................. P112,333 P132,733 P164,934 P410,000
Problem 2 – 6
1. Allocation of net loss for 2008:
Alvin Benny Celia Total
Salary
to Alvin................................. P 20,000 P20,000
Interests on average capital:
Alvin (P120,000 x 10%)............ 12,000
Benny (P200,000 x 10%).......... 20,000
Celia (P220,000 x 10%)............ 22,000 54,000
Balance, 30:30:40............................. (29,400) _(29,400) _(39,200) _(98,000)
Total ............................................... P 2,600 P( 9,400) P(17,200) P(24,000)
2. Statement of Partnership Capital
Year Ended December 31, 2008
Alvin Benny Celia Total
Capitals,
January 1, 2008................... P120,000 P180,000 P220,000 P520,000
Additional investments...................... 60,000 40,000 100,000
Capital withdrawals.......................... _______ ________ _(20,000) _(20,000)
Balances.......................................... 120,000 240,000 240,000 600,000
Net loss (see above)......................... __2,600 __(9,400) _(17,200) _(24,000)
Balances.......................................... 122,600 230,600 222,800 576,000
Drawings......................................... _(16,000) _______ _______ _(16,000)
Capitals, December 31, 2008............. P106,600 P230,600 P222,800 P560,000
36
Chapter
2
3. 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 Nelson Oscar Total
Capital
balances, 1/2/06............................ P45,000 P45,000 P45,000 P135,000
Additional
investment, 2006....................... _15,000 _15,000 __6,000 __36,000
Balances.................................................. 60,000 60,000 51,000 171,000
Net
income (Loss) - 2006, equally............. (1,800) ( 1,800) ( 1,800) ( 5,400)
Withdrawals,
2006.................................... (17,000) ( 7,000) ( 3,200) ( 27,200)
Capital
balances, 12/31/06......................... 41,200 51,200 46,000 138,400
Additional
investment, 2007....................... _____– _____– __6,000 ___6,000
Balances.................................................. 41,200 51,200 52,000 144,400
Net
income - 2007, 40: 30: 30.................... 10,800 8,100 8,100 27,000
Withdrawals,
2007.................................... (17,000) ( 7,000) ( 3,200) ( 27,200)
Capital
Balances, 12/31/07........................ 35,000 52,300 56,900 144,200
Additional
investment, 2008....................... ______– ______– ___6,000 ___6,000
Balances.................................................. 35,000 52,300 62,900 150,200
Net
income, 2008 (schedule 1).................. 56,365 42,272 20,363 120,000
Withdrawals,
2008.................................... (19,000) ( 9,000) ( 3,200) ( 31,200)
Capital
balances, 12/31/08......................... P72,365 P86,572 P80,063 P239,000
Schedule 1:
Dino Nelson Oscar Total
Annual salaries................................. P48,000 P24,000 P12,000 P84,000
Bonus (see computations below)....... – 10,909 – 10,909
Interest............................................ 3,600 3,600 3,600 10,800
Balance, equally............................... _* 4,765 __4,763 __4,763 __14,291
Totals.............................................. P56,365 P43,272 P20,363 P120,000
Bonus
computations:
Net income before bonus.................................................................. P120,000
Net income after bonus (P120,000
¸ 110%)....................................... _109,091
Bonus to Nelson............................................................................... P
10,909
* To Total
Partnership Operations 37
Problem
2 – 8
Red, White & Blue Partnership
Statement of Partners' Capital
For Year Ended December 31, 2008
Red White Blue Green Total
Balances,
beginning of year 40,200 20,200 40,600 P101,000
Add: 20% of fees billed to personal clients 8,800 4,800 4,400 18,000
Green's share of fees (Exhibit A) 3,200 3,200
Remaining net income (Exhibit A) _22,800 _22,800 _11,400 ______ _57,000
Subtotals _71,800 _47,800 _56,400 __3,200 179,200
Less: Withdrawals 10,400 8,800 11,600 5,000 35,800
Uncollectible accounts identified
with clients of each partner 2,400 900 3,300
Excess rent charged to Blue 1,800 1,800
Total deductions P12,800 P 9,700 P13,400 P 5,000 P
40,900
Balances,
end of year P59,000 P38,100 P43,000 P (1,800) P138,300
Red,
White & Blue Partnership
Exhibit
A – Computation and Division of Net income
For
Year Ended December 31,
2008
Total
revenue from fees P120,000
Expenses,
excluding depreciation and doubtful
accounts expense P38,700
Less: Excess rent charged to N ($300
x 6) __1,800
Subtotal 36,900
Add: Depreciation, computed as
follows:
$26,000 x 0.10 2,600
$10,000 x 0.10 x 1/2 ____500
Total
expenses, excluding doubtful accounts expense P40,000
Add:
Doubtful accounts expense ($3,000 x 0.60) __1,800
Total
expenses 41,800 ________
Net
income for year ended Dec. 31, Year 1 P 78,200
Division
of net income:
Fees billed to personal clients:
Red P44,000 x 20% P 8,800
White P24,000 x 2% 48,000
Blue, P22,000 x 20% 4,400 P18,000
Green's share of fees:
Gross fees from new clients
after April 1, Year 1 24,000
Less: Allocated expenses
($40,000 x $24,000/
$120,000) __8,000
Net income from new clients P16,000
Green's share (P16,000 x 20%) P
3,200
Total divided pursuant to
special agreement __21,200
Balance, divided in income-sharing
ratio as follows: P 57,000
To Red, 40% P22,800
To White, 40% 22,800
To Blue, 20% _11,400
Total P57,000
38
Chapter 2
Problem 2 – 9
Allan, Eman and Gino Partnership
Statement
of Profit Distribution
Year
Ended December 31, 2008
Allan Eman Gino Total
Interest P 4,000 P 750 P 250 P 5,000
Commission
(P16,120 – P5,000) x 10% – 1,112 1,112 2,224
Balance,
equally __5,926 _5,925 _5,925 _17,776
Total P 9,926 P7,787 P7,287 P25,000
Adjustments
(50% of P25,000 to Allan) __2,574 (1,287) (1,287) _____–
Total P12,500 P6,500 P6,000 P25,000
Problem 2 – 10
Gary, Sonny, and Letty Partnership
Statement
of Partners' Capital Accounts
Year
Ended December 31, 2008
Gary Sonny Letty Total
Capital
balances, 1/1/08 P210,000 P180,000 P 90,000 P480,000
Additional
investments ___9,100 _______ _______ __9,100
Total _219,100 _180,000 _90,000 489,100
Profit
distribution:
Salaries 13,680 11,520 10,640 35,840
Interest 25,920 21,600 10,800 58,320
Bonus to Gary and Sonny (Schedule 1) – – –
Balance, equally __(9,720) _(9,720) _(9,720) (29,160)
Total __29,880 _23,400 _11,720 _65,000
Total 248,980 203,400 101,720 554,100
Drawings _(21,000) (18,000) __(9,000) _(48,000)
Capital
balances, 12/31/08 P227,980 P185,400 P 92,720 P506,100
Schedule
1: Computation of the bonus.
Net
profit before interest, salaries and bonus P 65,000
Less: Salaries P35,840
Interest _58,320 __94,160
Net profit (loss) before bonus P(29,160)
Therefore
no bonus is to be given to Gary and Sonny.
Partnership Operations 39
Problem 2 – 11
a.
Entries to record the formation of the partnership and the events that occurred
during 2008:
Cash 1,100,000
Inventory 800,000
Land 1,300,000
Equipment 1,000,000
Mortgage payable 500,000
Installment note payable 200,000
Kobe, capital (P600,000 + P800,000
+
P1,000,000 – P200,000) 2,200,000
Lebron, capital (P500,000 +
P1,300,000
- P500,000) 1,300,000
(1) Inventory 300,000
Cash 240,000
Accounts payable 60,000
(2) Mortgage payable 50,000
Interest expense 20,000
Cash 70,000
(3) Installment note payable 35,000
Interest expense 20,000
Cash 55,000
(4) Accounts receivable 210,000
Cash 1,340,000
Sales 1,550,000
(5) Selling and general expenses 340,000
Cash 278,000
Accrued expenses payable 62,000
(6) Depreciation expense 60,000
Accumulated depreciation 60,000
(7) Kobe,
drawing 104,000
Lebron, drawing 104,000
Cash 208,000
(8) Sales 1,550,000
Income summary 1,550,000
(9) Cost of goods sold 900,000
Inventory 900,000
P900,000 = P800,000 beginning
inventory
+ 300,000 purchases
-
200,000 ending
inventory
40
Chapter 2
Income summary 1,340,000
Cost of good sold 900,000
Selling and general expenses 340,000
Depreciation expense 60,000
Interest expense 40,000
Income summary 210,000
Kobe, capital 105,000
Lebron, capital 105,000
Kobe,
capital 104,000
Lebron, capital 104,000
Kobe, drawing 104,000
Lebron, drawing 104,000
Schedule to allocate partnership net
income for 2008:
Kobe Lebron Total
Profit percentage 60% 40% 100%
Beginning capital balance P2,200,000 P1,300,000 P3,500,000
Net income (P1,550,000 revenue
- P 1,340,000 expenses) 210,000
Interest on beginning capital
balances (3%) 66,000 39,000 (105,000)
P105,000
Salaries 120,000 120,000 (240,000)
P(135,000)
Residual deficit (81,000) (54,000) (135,000)
Total P105,000 P105,000 -0-
b. Kobe-Lebron Partnership
Income Statement
For the Year Ended December 31, 2008
Sales P1,550,000
Less: Cost of goods sold:
Inventory, January 1 P800,000
Purchases 300,000
Goods available for sale P1,100,000
Less: Inventory, December 31 (200,000) (900,000)
Gross profit P650,000
Less: Selling and general expenses 340,000
Depreciation expenses 60,000 400,000
Operating income P250,000
Nonoperating expense- interest (40,000)
Net income P210,000
Partnership Operations 41
c. Kobe-Lebron
Partnership
Balance Sheet
At December 31, 2008
Assets
Cash P1,589,000
Accounts receivable 210,000
Inventory 200,000
Land 1,300,000
Equipment (net) 940,000
Total assets P4,239,000
Liabilities
and Capital
Liabilities:
Accounts payable P60,000
Accrued expenses payable 62,000
Installment note payable 165,000
Mortgage payable 450,000
Total liabilities P737,000
Capital:
Kobe, capital P2,201,000
Lebron, capital 1,301,000
Total capital 3,502,000
Total liabilities and capital P4239,000
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