Baliwag Polytechnic College

Dalubhasaan Kong Mahal

Institute of Business and Accountancy

ACT27A – Accounting for Special Transactions M. Manayao, CPA

Assignment 02 – Partnership Operations

Division of profits and losses

Problem 1
A, B and C’s partnership agreement stipulates the following:
 Annual salaries of P12,000 to A and P8,000 to C.
 10% bonus to A, based on profit after salaries but before deducting the bonus.
 10% interest on the following capital contributions: A, P100,000; B, P60,000; and C, P120,000.
 P/L ratio of 40:30:30

Case 1: Sufficient profit

The partnership earns profit of P100,000. Compute for the partners’ respective shares.

Case 2: Insufficient profit

The partnership earns profit of P10,000. Compute for the partners’ respective shares.

Case 3: Loss
The partnership incurs loss of P20,000. Compute for the partners’ respective shares.

Interest on weighted average capital

Problem 2
A and B’s partnership agreement stipulates the following:
 Monthly salary of P4,000 to A.
 20% bonus to A, based on profit after deductions for salary and bonus, but before deduction of interest.
 12% interest on B’s weighted average capital balance. B initially contributed P30,000. During the
period, B contributed additional P10,000 on July 1 and P6,000 on November 30, and withdrew P4,000
on October 1.
 Balance is shared equally

Case 1: Full year

The partnership earned profit of P90,000 before salaries, bonus and interest on capital, for the year ended
December 31, 20x1.

Required: Provide the journal entry to close the income summary account to the partners’ respective capital
accounts.

Case 2: Partial year

The partnership earned profit of P90,000 before salaries, bonus and interest on capital, for the eight months
ended December 31, 20x1.

ASSIGNMENT 02 – ACT27A | M. MANAYAO, CPA 1

Required: Provide the journal entry to close the income summary account to the partners’ respective capital
accounts.

Reconstruction of information
Problem 3
A and B’s partnership agreement stipulates the following:
 Annual salary of P20,000 to A.
 10% bonus to A, based on profit after salaries and bonus.
 Balance is shared on a 60:40 ratio.

Required: If B’s share in the partnership profit for the year is P32,000, how much is the partnership profit
before salary and bonus?

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ASSIGNMENT 02 – ACT27A | M. MANAYAO, CPA 2