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Problem #1

Establish Profit or Loss Sharing Method

Zenaida Rivadelo opted for an early retirement from a business process outsourcing company located in
The Fort, Taguig City and returned to Dagupan. She was presented with a bussines opportunity by her
niece, Helen Mamitag, who has B.S Degree in Computer Science. Rivadela and Mamitag formed a
partnership called The InfoTech Consultants. Rivadelo contributed all the P700,000 initial capital. She
only devoted one-half time to the business. Mamitag the industrial partner, works full time. The
monthly drawings were P50,000 for Ravidelo and P75,000 for Mamitag.

At the end of the first year of operation, the two partners talked about establishing an agreement to
govern the division of the partnerships’ profits or losses. Ravidelo proposed that the division be equal.
Although she devoted only one-half of Mamitag’s work time to the business, she contributed all of the
startup funds and is the more experienced in this line of business. Mamitag, suggested that the income-
sharing though she appreciates her bigger monthly drawings.

Required:
Proposed an equitable income-sharing scheme considering their contribution.

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Problem #2
Formation and operation of a partnership

On June 30, San Mateo and Caballes formed a partnership. The partners agreed to invest equal amounts
of capital. San Mateo invested his proprietorship’s assets and liabilities as follows:

San Mateo’s
Fair Market
Book Value
Value
Accounts Receivables P72,000 P72,000
Allowances for Uncollectible Account -0- 10,5000
Merchandise Inventory 223,400 241,000
Prepaid Expenses 17,000 17,000
Office Equipment 459,00 276,000
Accumulated Depreciation 153,000 -0-
Accounts Payable 191,000 191,000

On June 30, Caballes invested cash in an amount equal to the current market value of San Mateo’s
partnership capital. San Mateo, the managing partner, would earn two- thirds of partnership profits.
Caballes agreed to accept one-third of the profits.

During the remainder of the year, the partnership earned P450,000. The temporary withdrawals of San
Mateo and Caballes were P352,000 and P230,000, respectively.

Required:
1. Journalize the partners’ initial investments in a new set of books.
2. Prepare the partnership’s statement of financial position immediately after its formation on June 30.
3. Journalize the entries to close the income summary and the drawing accounts.

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Problem #3
Rules for the distribution of profits and Losses

Pozon and Digao established a general professional partnership by investing P200,000 and
P350,000 respectively.

a. Loss is P330,000 and the partners have no written partnership agreement.

b.Profit is P330,000 and the partnership agreement states that the partners’ share profits and
losses on the basis of their capital contribution.
c.Loss is P385,000 and the partnership agreement states that the partners’ share profit on the
basis of their capital contribution.
d.Profit is P625,000. The first P300,000 is shared on the basis of their capital contribution. The
next P225,000 is based on partners’ service, with Pozon receiving 30% and Digao receiving
70% . the remainder is shared equally.

Required:
1. Determine the partners’ share in the profit or loss for each of the situations above.
2. using the information in situation d, journalize the entries to the close (a) income summary
and (b) partners’ drawing accounts assuming that during the year Pozon and Digzo withdrew
cash of P310,000 and P250,000 respectively. Indicate the amount of increase or decrease in
each partners’ capital balance, and the overall effect on partnership capital.

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Problem # 4
Distribution of profits or losses based on Partners’ Agreement.

Ables and Galang divide partnership profits and losses solely on the basis of their average
capital balances. Ables had P270,000 invested during all of 2015 ; Galang had P200,000 invested
from January 1 to August 31, and he invested another P75,000 on September 1. If profit was
P800,000 during 2015, how much should each partner receive?

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Problem # 5
Distribution of Profits or losses based on Partners’ Agreement.

The partnership agreement of Palaganas and Cristobal provides for salary allowances of
P320,000 for Palaganas and P260,000 for Cristobal. They share remaining profits on the basis of
3/5 for Palaganas and 2/5 for Cristobal. The 2015 profit amounted to P600,000. Calculate the
share of each partner.

Problem # 6
Distribution of Profits or losses based on Partners’ Agreement.

Partners Flores and Jacalan have agreed to receive salary allowances of P100,000 and P120,000,
respectively. In addition, they are allowed 9% interest on their capital balances of the beginning
of the year. The remainder is to be divided equally. Flores, capital balance was P400,000, and
Jacalan, capital balance was P500,000. Prepare the profit distribution schedule assuming a
profit of P420,000.

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