PARTNERSHIP OPERATIONS

Quiz #3
Set B

THEORY:

TRUE OR FALSE: Write the word true if the statement is true, otherwise write the
word false

1. If the partners did not agree as to how profits are to be divided, then such should
be divided among the partners equally.

2. All partnership, just like corporations, are subject to income tax.

3. Bonus is allowed to partners only if there is a partnership profit, since bonus is

based on profit.

4. Unless otherwise agreed, allowance for salaries and interest are allowed to
partners whether there is a profit or a loss; whether the profit is sufficient or
insufficient.

5. The drawing account of a partner may have a debit or a credit balance.

6. If the partnership agreement specifies a method for sharing profits, but not losses,
then losses are shared in the same proportion as profits.

7. The profit of the partnership is transferred to the drawing accounts of the partners
if the intention is to keep the capital account intact for investments and permanent
withdrawals of capital.

8. An incentive given to the managing partner which is usually a percentage of net

income is called salary.

9. An adequate accounting system and an accurate measurement of income are not

needed by a partnership because the profit is divided among two or more persons.

10. All partners, whether capitalist or industrial are to share on whatever partnership
profits or losses.

PROBLEM SOLVING: Show supporting computation. Box the required final

answer. No solutions, no points

Tayag, Unso and Vidal, a partnership formed on January 1, 2019 had the following initial
iinvestments:
 Tayag – P 100,000 Unso – P 150,000 Vidal – P 225,000

The partnership agreement stated that profits and losses are to be shared equally by the
partners after consideration is made for the following:

• Salaries allowed to partners: P60,000 for Tayag’ P48,000 for Unso and P 36,000
for Vidal.
• Average partner’s capital balances during the year shall be allowed 10%

Additional information:

• On June 30 2019, Tayag invested an additional P60,000

• Vidal withdrew P70,000 from the partnership on Sept 30, 2019
• Share on the remaining profit was P3,000 for each partners
1. What is the total interest on average capital balances of the partners?
Tayag

2. What is the partnership net profit at December 31, 2019 before salaries, interest
and partners’ share on the remainder?

3 A and B invest P200,000 and P100,000 respectively in a partnership and agree to

a division of net income that provides for an allowance of 10% interest on original
investment, salary allowances of P24,000 and P48,000 respectively, with the
remainder divided equally. What would be A’s share on a net income of P90,000.

4. Partners AA and BB have profit and loss with the following provisions; salaries of
P30,000 and P45,000 for AA and BB, respectively; a bonus to AA of 10% of net
income after salaries and bonus; and interest of 10% on average capital balances
of P20,000 and P35,000 for AA and BB, respectively. One-third of any remaining
profits will be allocated to AA and the balance to BB. If the partnership had net
income of P22,000, how much should be allocated to partner AA, assuming that
the provisions of the profit and loss agreement are ranked by order of priority
starting with salaries?

On January 1, 2019, Besa, Basco, Buan and Baduel formed theB4 Trading, a partnership
with capital contributions as follows: Besa – P150,000; Basco – P75,000; Buan – P75,000
; and Baduel – P60,000. The partnership agreement stipulates that each partner shall
receive a 5% interest on capital contributed and that Besa and Basco shall receive
salaries of P15,000 and P9,000, respectively. The agreement further provides that Buan
shall receive a minimum of P7,500 per annum and Baduel a minimum of P18,000, which
is inclusive of amounts representing interest and their respective share in partnership
profits. The balance of the profits shall be distributed among the partners in the ratio of
3:3:2:2.

5. What amount must be earned by the partnership in the year 2019, before any
charge for interest and partners’ salaries, in order that Besa may receive an
aggregate of P37,500 including interest, salary and share of profits.

6. Using the information in #5, the total profit share of Buan is:

7. Using the information in #5, the total profit share of Baduel is:

8. Banas and Belda are partners who share profits equally and losses in a 2:1 ratio.
If they have beginning capital balances of P120,000 and P118,000, made no
additional investments nor withdrawal, and suffered an unprofitable year with loss
of P48,000, the capital balances of each partner at year end will be:

9. The partnership agreement between Moran and Reynoso stipulates that Moran is
to receive a 20% bonus on profits before bonus, with the residual profit and loss
to be apportioned in the ratio of 2:3 respectively

Which partner has a greater advantage when the partnership has a profit and when
it incurred a loss. Show supporting computation.

10. The partnership of Louise, Matisse and Novice with capital contributions of
P200,000, P300,000 and P100,000 and divides profit and losses in the ratio of
4:5:3, respectively. During the year ended December 31, 2019 the business
earned P240,000, Novice’s share in this income is: