I.

Distribution of profits

The following is the statement of financial position of MEC Partnership as of June 30,
2013:

MEC Partnership
Statement of Financial Position
June 30, 2013

ASSETS LIABILITIES & PARTNERS’ EQUITY

Cash P 175,000 Liabilities P108,000
Other Assets 495,000 Margaret,Capital 250,000
Elizabeth, Capital 200,000
Cecilia, Capital 112,000
Total P 670,000 Total P 670,000
========= =========

The partners agreed to distribute the profits as follows:

1. Interest on ending capital of 10%.
2. Annual salaries to Elizabeth and Cecilia of P120,000 each.
3. Remainder: Margaret- 40%; Elizabeth-30% and Cecilia-30%..
Required:

Record the distribution of the net income amounting to P250,000 generated by the
partnership during the six-month period ending June 30, 2013.

II. Preparation of financial statements

The following adjusted balances were taken from the books of

RGem Trading as of December 31, 2011.
Accounts Payable P93,033
Accounts Receivable 143,000
Accumulated Depreciation- Delivery Equipment 140,000
Allowance for Doubtful Accounts 5,000
Cash 150,000
Delivery Equipment 350,000
Freight in 18,000
Gem, Capital 80,000
Romy, Capital 70,000
Gem, Drawing 10,000
Romy, Drawing 5,000
Administrative Expenses 112,700
Investment in Trading Securities 26,000
Merchandise Inventory, January 1 100,000
Notes Payable (due 2015) 413,100
Notes Receivable 36,700
Prepaid Expenses 7,633
Purchase Discounts 3,000
Purchase Returns and Allowances 5,000
Purchases 520,000
Sales 758,000
Sales Discounts 11,000
Sales Returns & Allowances 15,000
Distribution Costs 103,100
SSS & Medicare Contributions Payable 2,000
Unearned Commission Income 39,000
Merchandise Inventory as of December 31, 2011 amounted to P145,000.

Required:
1. Prepare the Income Statement, Statement of Changes in Partners' Equity, and Statement of Financial
Position of RGem Trading

2.The Articles of Co-Partnership provide that net income shall be divided as

follows: (a) 5% interest on beginning capital of each partner and (b) the balance
to be divided equally.

III. Problem Solving

1. United Company started its operations on March 1, 2012. Partners Elsie,

.Nim and Mavic agree to share in the profits and losses as follows:
The partners will receive monthly salary allowance of P6,500, P5,000, and P4,000,
respectivelyMavic, the managing partner, will receive bonus equal to 50% of net income after
salary allowanceAll remaining profit or losses will be shared 2:2:1 by the partners,
respectively.

Assuming a net income in 2012 of P 280,000, what is the total share of Nim?
.
2. A partnership’s articles of co-partnership provide that partners may increase or decrease their capital
balances through additional investment and permanent withdrawals, respectively. Margaret, one of the
partners, had a capital balance of P350,000 on January 1 and made additional investments of P50,000
each on April 1, July 1 and October 1 of the current year. She permanently withdrew cash of P25,000 on
June 1 and November 1. Her drawing account reflected debits of P10,000 and P5,000 on March 1 and
August 1, respectively. If the partners agreed to allow themselves 20% interest based on ending
capital, how much interest is to be given to Margaret at year end?

3 . In its first nine months of operation, the partnership of Christian,

. Michael, and Angelo made a net income of P80,000, before providing for 20% annual interest on
beginning capital balances and monthly salary allowance of P5,000, P3,500, and P2,000, respectively.
The beginning capital contributions of the partners are as follows: Christian, P50,000; Michael, P30,000;
and Angelo, P20,000. How much is the share of Christian in the partnership profit?

4. Floyd and Greg are partners who share profits and losses after salary
allowance and interest in the ratio of 3:2, respectively. Floyd’s monthly salary is P2,000
whileGreg’sis P15,000 per annum. The partners are also paid interest on their average capital balances.
In 2012, Floyd received P18,000 in interest and Greg P12,000. If Greg’s share of partnership income
was P30,000 in 2012, what was the total partnershipincome?