ACA 321B

Partnership Operations

ABC, QRS and XYZ are manufacturers’ representative in the architecture business. Their capital accounts in
the MYX Partnership for 2020 were as follows:
A
BC QRS XYZ
January 1, Balances P45,000 P60,000 P25,000
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.
a. Monthly salaries are P15,000 to ABC, P20,000 to QRS and P18,000 to XYZ. ABC receives a bonus of
5% of net income after deducting his bonus. Interest is 10% of ending capital balances. Any remainder
is divided by ABC, QRS and XYZ in a 5:2:3 ratio. The income Summary account has a credit balance of
P945,000 before closing.

b. Interest is 12% of weighted average capital balances. Annual salaries are P175,000 to ABC, P210,000
to QRS and P190,000 to XYZ. QRS 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 ABC, QRS and XYZ, respectively. Net
income was P350,000 before any allocation.

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

d. Monthly salaries are P12,000 to ABC, P14,000 to QRS and P15,000 to XYZ. QRS 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. Any remainder is to be divided by ABC, QRS and XYZ in
a 2:1:2 ratio. The Income Summary account has a debit balance of P200,000 before closing.

e. Annual salaries of P150,000 to ABC, P180,000 to QRS and P270,000 to XYZ are allowed to the extent
of the earnings only. Any remainder is to be divided equally among the partners. Net income before
allocation is P320,000.