PARTNERSHIP OPERATIONS

The AA, BB and CC Partnership was formed on January 2, 2008. The original cash investments were as
follows:
AA P 96,000
BB 144,000
CC 216,000
According to the general professional partnership contract, the partners were to be remunerated as
follows:
a. Salaries of P14,400 for AA, P12,000 for BB, and P13,600 for CC.
b. Interest at 12% on the average capital account balances during the year.
c. Remainder divided 40% to AA, 30% to BB and 30% to CC.

Income before partners’ salaries for the year ended December 31, 2008, was P92,080. AA invested an
additional P24,000, in the partnership on July 1; CC withdrew P36,000 from the partnership on October
1; and, as authorized by the partnership contract, AA, BB and CC each withdrew P750 monthly against
their shares of net income for the year.

Required:
1. The share of partners AA, BB and CC in the net income, respectively.
2. The capital balances of partners AA, BB and CC on December 31, 2008, respectively.
3. If the salaries to partners’ are to be recognized as operating expenses by the partnership, the
share of partners AA, BB and CC in the net income.
4. Journal entry to record the salaries in relation to number 3 question.
5. Using the same information in number 3, the capital balance of partner AA, BB and CC on
December 31, 2008.

Assignment 2