DIVINE WORD COLLEGE OF CALAPAN

AC_FAR- FINANCIAL ACCOUNTING AND REPORTING

Partnership Operation

PROBLEM 1
Harvyn, Rico and Acel are manufacturers’ representative in the architecture business. Their capital accounts in the HRA
Partnership for 2012 are as follows:
Harvyn Rico Acel
January 1, Balances P 45,000 P 60,000 P 25,000
March 1, withdrawal 12,000
April 1, investment 10,000
May 1, investment 24,000
June 1, investment 9,000
August 1, withdrawal 3,000
October 1, withdrawal 18,000
December 1, investment 6,000

Required:
For each of the following independent income-sharing agreements, prepare an income distribution schedule:

1. Monthly salaries are P15,000 to Harvyn, P20,000 to Rico, and P18,000 to Acel. Harvyn receives a bonus of 5% of net
income after deducting his bonus. Interest is 10% of ending capital balances. Any remainder is divided by Harvyn, Rico
and Acel in a 5:2:3 ratio. The Income Summary account has a credit balance of P945,000 before closing.

2. Interest is 12% of weighted average capital balances. Annual salaries are P175,000 to Harvyn, P210,000 to Rico and
P190,000 to Acel. Rico receives a bonus of 25% of net income after deducting the bonus and his salary. Any
remainder is divided in a 3:1:1 ratio by Harvyn, Rico and Acel, respectively. Net income was P350,000 before any
allocations.

3. Acel receives a bonus of 20% net income after deducting the bonus and salaries. Annual salaries are P200,000 to
Harvyn, P180,000 to Rico and P250,000 to Acel. Interest is 12% of the ending capital in excess of P40,000. Any
remainder is to be divided by Harvyn, Rico and Acel in the ratio of their beginning capital balances. Net income was
P580,000 before any allocations.

4. Monthly salaries are P12,000 to Harvyn, P14,000 to Rico and P15,000 to Acel. Rico receives a bonus of 10% of net
income after deducting his bonus. Interest is 20% on the excess of the ending capital balances over the beginning
capital balances. Remainder is to be divided by Harvyn, Rico and Acel in a 2:1:2 ratio. The Income Summary account
has a debit balance of P200,000 before closing.

5. Annual salaries of P150,000 to Harvyn, P180,000 to Rico and P270,000 to Acel are allowed to the extent of the
earnings only. Any remainder is to be divided equally among the partners. Net income before allocation P320,000.

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