Partnership OPERATION

Arañez Accounting Advance

Session 2 on Partnership: OPERATIONS

Prepared by: Rañer S. Arañez, CPA

Problem 1
A, B, and C are partners of ABC partnership. The original investment of the partners are P39,000 and
P91,000, respectively. During the year, the partnership had an income of P150,000. The following are
the changes in equity of the partners for the current year:
A B
Beginning Balance 200,000 250,000
30-Jun Additional Investment 50,000
31-Jul Withdrawal (20,000)
31-Aug Additional Investment 10,000
31-Oct Additional Investment 10,000 25,000
30-Nov Withdrawal (30,000)
Balance before Profit 230,000 265,000

Required:
Find the share in profit and ending capital balance of A and B under the following methods:
1. Share in Profits Equally
2. Share in Profits according to capital balances:
a. Ratio of ORIGINAL capital investments
b. Ratio of capital balances at the BEGINNING of the year
c. Ratio of capital balances at the END of the year
d. Ratio of AVERAGE capital Balances
3. By allowing salaries of P50,000 to partner A and the balance is shared equally.
4. By allowing 15% interests on partners’ capital and the balance to be divided in a ratio of 40:60
a. The interest is based on partners’ beginning capital
b. The interest is based on partners’ average capital
5. By allowing Bonus to the managing partner (Assumed to be A) and the balance in an agreed
ratio of 40:60
a. 20% Bonus based on Net Income before Bonus
b. 20% Bonus based on Net Income after Bonus

Problem 2
Partners A, B, and C are partners of ABC Partnership. Partner C is the managing partner. The partners
agreed to give the managing partner a bonus. The original investments of the partners are P300,000,
P350,000, and P350,000, respectively. At the end of the year, the capital balances before profit of the
partners is P350,000, P400,000, and P450,000, respectively. The current year’s Income summary is
P785,000.

Required: Compute for the Share in profit of Partners’ A, B, and C.

1. 15% bonus to the managing partner is based on Net Income before bonus. The remaining
balance is divided in 4:3:3 between the partners
 Partnership OPERATION
Arañez Accounting Advance

2. 15% bonus to the managing partner is based on Net Income after bonus. The remaining balance
is divided in proportion to the original capitals

Problem 3
Partners A and B are partners of AB Partnership. For the current period, the partnership had a loss of
P500,000. The partners’ original investments are P100,000 and P300,000, respectively.
A, Capital A, Withdrawal
1/1 P500,000 (beg.) 10/31 P150,000
6/1 P100,000

B, Capital B, Withdrawal
1/1 P400,000 (beg.) 8/1 P100,000
9/1 P150,000
Required: Compute for the Share in Net Profit and the ending capital balances of the partners with the
following assumption.
a. Partner A is the managing partner, he is allowed the bonus based on Net Income.
b. The remaining balance is divided in the Ratio of AVERAGE Capital Balances

Problem 4
Partners A and B are partners of AB Partnership. For the current year, the partnership had a profit of
P500,000. The partners decided to distribute the profit/loss as follows:
a. Bonus to A of 30% of profit after Salaries, Interest, and Bonus
b. Annual Salaries of P100,000 to A and P50,000
c. 10% Interest on average capital balances
d. Balance is divided 40:60
The partner’s capital balances are as follows:
A B
Balance before Profit/Loss 400,000 500,000
Average Capital Balance 350,000 400,000
Required: Compute for the Share in Profit and the Ending Balance of the Capitals of the partners.

Problem 5
Partners A and B are partners of AB Partnership. For the current year, the partnership had a loss of
P100,000. The partners decided to distribute the profit/loss as follows:
a. Bonus to A of 30% of profit after bonus
b. Annual Salaries of P50,000 to A and P30,000
c. 10% Interest on average capital balances.
d. Balance is divided 40:60
The partner’s capital balances are as follows:
A B
Balance before Profit/Loss 100,000 200,000
Average Capital Balance 150,000 250,000
Required: Compute for the Share in Profit and the Ending Balance of the Capitals of the partners.
 Partnership OPERATION
Arañez Accounting Advance

DIY DRILLS

DIY Drill 1
Partners A and B are partners of AB Partnership. For the current year, the partnership had a profit of
P300,000. The partners decided to distribute the profit/loss as follows:

a. Bonus to A of 30% of profit after Salaries and interest but before bonus
b. Annual Salaries of P100,000 to A and P50,000
c. 10% Interest on ending capital balances before profit/loss
d. Balance is divided equally

The partner’s capital balances are as follows:

A B
Balance before Profit/Loss 300,000 400,000
Average Capital Balance 250,000 350,000

DIY Drill 2
Partners A and B are partners of AB Partnership. For the current year, the partnership had a profit of
P300,000. The partners decided to distribute the profit/loss as follows:
a. Bonus to A of 30% of profit after Salaries and bonus.
b. Annual Salaries of P200,000 to A and P150,000
c. 20% Interest on average capital balances before profit/loss
d. Balance is divided 60:40
The partner’s capital balances are as follows:
A B
Balance before Profit/Loss 300,000 400,000
Average Capital Balance 250,000 350,000
Required: Compute for the Share in Profit and the Ending Balance of the Capitals of the partners.