1. Red and White formed a partnership in 2011.

  The partnership agreement provides for annual

salary allowances of P55,000 for Red and P45,000 for White.   The partners share profits
equally and losses in a 60:40 ratio.  The partnership had earnings of P80,000 for 2011 before
any allowance to partners.  What amount of these earnings should be credited to each partner’s
capital account?

          Red         White

a.  P40,000      P40,000
b.  P43,000      P37,000
c.  P44,000      P36,000
d.  P45,000      P35,000
The amount of earnings that should be credited to each partner’s account are P43,000 and P37,000, for Red and
White, respectively, computed as follows:
 Red             White          Total
Salary allowances                       P55,000       P45,000       P100,000
Loss after allowances (60:40)      ( 12,000)     (  8,000)     (  20,000)
Earnings credited to partners        P43,000       P37,000       P  80,000

2. On January 2, 2011, Bueno and Perez formed a partnership with capital distributions of
P175,000 and P25,000, respectively. They agreed to share profits and losses 80% and 20%,
respectively. Perez is the general manager and works in the partnership full time. Perez is
given  salary of P5,000 a month; an interest of 5% on starting capital; and a bonus of 15% of net
profit before the salary, interest, and bonus. The condensed profit and loss statement of the
partnership, for the year ended December 31, 2011, is as follows:

Net sales                                                                 P875,000

Cost of sales                                                              700,000
Gross profit on sales                                              P175,000
Expenses (including salary, interest and bonus)       143,000
Net profit                                                                 P  32,000

The bonus in 2011 is

a.    P13,304.35
b.    P18,000.00
c.    P15,300.00
d.    P20,700.00

The bonus to Perez in 2011 is P18,000, computed as follows:

   Net profit after salary, interest, and bonus          P  32,000

   Salary of Perez (P5,000 x 12)                                 60,000
   Interest on starting capitals (P200,000 x 5%)         10,000
   Net profit before salary and interest,
        but before bonus                                        P102,000
   Divide by                                                                85%
   Net profit before salary, interest, and bonus        P120,000

   Bonus of Perez in 2011 (P120,000 x 15%)          P  18,000

 3. Herm, Marc, and Alex formed a partnership on January 1, 2011, and contributed P150,000, P200,000,
and P250,000, respectively. The articles of co-partnership provides that the operating income be shared
among the partners as follows: as salary, P24,000 for Herm, P18,000 for Marc, and P12,000 for Alex;
interest of 12% on the average capital during 2011 of the three partners; and, the remainder in the ratio of
2:4:4, respectively.

The operating income for the year ending December 31, 2011 amounted to P176,000. Herm contributed
additional capital of P30,000 on July 1 and made a drawing of P10,000 on October 1; Marc contributes
additional capital of P20,000 on August 1 and made a drawing of P10,000 on October 1; and, Alex made
a drawing of P30,000 on November 1.

The division of the P176,000 operating income is:

a.    Herm, P53,760; Marc, P62,520; and, Alex, P59,720
b.    Herm, P35,200; Marc, P70,400; and, Alex, P70,400
c.    Herm, P48,400; Marc, P66,800; and, Alex, P60,800
d.    Herm, P53,180; Marc, P62,060; and, Alex, P60,760

The P176,000 operating income is divided as Herm, P53,180; Marc, P62,060; and Alex, P60,760, respectively,
computed as follows:

   Herm: P150,000 x 12/12              P150,000

                  30,000 x   6/12                15,000
                (10,000) x  3/12                  (2,500)
               Average Capital              P162,500

   Marc: P200,000 x 12/12               P200,000

                  20,000 x  5/12                   8,333
                (10,000) x  3/12                  (2,500)
               Average capital               P205,833

   Alex: P250,000 x 12/12               P250,000                   

               (30,000) x  2/12                   (5,500)
               Average capital               P245,000

Herm Marc Alex Total

Salary allowances P24,000 P18,000 P12,000 P54,000
12% interest on
average capital 19,500 24,700 29,400 73,600
Remainder, 2:4:4     9,680 19,360 19,360 48,400
Division of ope. inc. P53,180 62,060 P60,670 P176,000

4. The partners’ capital balances on December 31, 2011 are:

a.    Herm, P179,680; Marc, P229,360; and, Alex, P239,360
b.    Herm, P179,760; Marc, P229,520; and, Alex, P239,520
c.    Herm, P189,680; Marc, P239,360; and, Alex, P269,360
d.    Herm, P223,180; Marc, P272,060; and, Alex, P280,760
  The partners’ capital balances on December 31, 2011 are Herm, P223,180; Marc, P272,060; and Alex, P280,760,
respectively, computed as follows:

Herm Marc Alex

Capital balances, Jan. 1 P150,000 P200,000 P250,000

Additional contributions 30,000 20,000     -

 Drawings (10,000) (10,000) (30,000)

Share in operating income (6)   53,180   62,060   60,760

Capital balances, Dec. 31, 2011 P223,180 P272,060 P280,760

5. The partnership agreement of Bing and Bong provides that Bing is to receive a 20% bonus on
profits before the bonus. Remaining profits and losses are divided in the respective ratio of 2:3.
Which partner has a greater advantage when the partnership realizes a profit or when it
sustains a loss?

      Profit         Loss
a.    Bing           Bong
b.    Bing           Bing
c.    Bong          Bing
d.    Bong          Bong
In case of a profit, Bing’s share will be 20% plus 40% of the remaining 80%, or a total of 52%; in case of a loss, Bing’s
share will only be 40%.

6. Michelle, an active partner in the Michelle-Esme Partnership, receives an annual bonus of 25%
of the partnership income after deducting the bonus. For the year ended December 31, 2011,
the partnership income before bonus amounted to P240,000. The bonus of Michelle for the year
2011 is

a.    P45,000
b.    P48,000
c.    P60,000
d.    P80,000
  The bonus of Michelle for the year 2011 is P48,000, computed as follows:
            Michelle’s bonus (P240,000  125%) x 25%                      P48,000

7. Mark and Valerie are partners with capitals P200,000 and P100,000 and sharing profits and
losses at 3:1, respectively.  They decided to admit Nora as a new partner with a 50% interest in
the firm.  Nora invested cash of P150,000, and Mark and Valerie transferred portions of their
capitals as a bonus to Nora.  After Nora’s admission, Valerie’s capital would be:
a.      P  37,500                                      c.  P  81,250
b.      P  56,250                                      d.  P100,000

 Mark            Valerie         Nora            Total

Contributed capital    P200,000     P100,000     P150,000     P450,000
Bonus (3:1)
  Nora’s AC  P225,000
  Nora’s CC    150,000
                 P  75,000                 
From Mark      x ¾      (56,250)                          56,250
From Valerie    x ¼                      (  18,750)       18,750               
            Agreed capital          P143,750     P  81,250     P225,000     P450,000  

8. Tito and Vic, partners sharing profits and losses equally, have capital balances of P90,000
each.  Joey is admitted as a new partner, making cash investment of P120,000, to a one-third
interest in both capital and earnings.  If Joey is credited in full for the amount of his investment,
the new capital of the partnership would be:
 a.    P240,000.
b.    P300,000.
c.    P360,000.
d.    P420,000.
Contribution of Joey                    P120,000
            Agreed capital ratio                           1/3
            Total agreed capital                    P360,000

9. Moonbits Partnership had a net income of P8,000 for the month ended September 30, 2011.
Sunshine purchased an interest in Moonbits Partnership of Liz and Dick by paying Liz P32,000
for half of her capital and half of her 50% profit-sharing interest on October 1, 2011. At this time,
Liz’s capital balance was P24,000 and Dick’s capital was P56,000. Sunshine should receive
capital credit equal to:

a.    P12,000
b.    P16,000
c.    P20,000
d.    P26,667
 Capital of Liz                               P24,000
            Interest purchased                           1/2 
            Capital credit of Sunshine             P12,000
10. Sarah is admitted into the firm of Joy, AA and Pilar.  The old partners agreed to sell to Sarah
one-fourth of their respective equities and profit share.  Sarah paid a total price of P1,000,000. 
Before Sarah’s admission, Joy, AA and Pilar have capital balances of P2,000,000, P1,000,000
and P500,000 and they share profits at the ratio of 6:3:1.  Partnership assets are fairly stated
and implied goodwill is to be recognized prior to Sarah’s admission.

The new capital of the partnership is:

a.   P3.5M
b.   P4M
c.   P5M
d.   P4.5M
Sarah’s contribution            P1,000,000
            Divided by interest bought   one-fourth
            Total agreed capital           P4,000,000