QUIZ – PARTNERSHIP OPERATIONS

Name: __________________________________________
Instructions: Supply what is asked. Erasures or alterations will invalidate your answer.

Problem 1:
On January 31, 2011, Siong, Villamor, and Cal formed SVC Partnership with respective capital contribution of P
1,000,000; P 1,500,000; and P 2,500,000. Their partnership agreement provides that profit or loss shall be distributed
accordingly:
 Interest at 12% of the original capital contribution.
 Monthly salary of P 40,000 for Villamor and annual salary of P 420,000 for Cal.
 Bonus to Siong of 25% based on net income after interests, Cal’s salary, but before bonus.
 Any under or over allocation shall be distributed in the ratio of their original capital contributions.

On December 31, 2011, Siong and Villamor made an additional investments of P 200,000, and P 300,000,
respectively, while Cal made a withdrawal of P 180,000. The statement of financial position of the partnership shows
that Cal’s Capital on December 31, 2011 is P 2,820,000.

Requirements:
1. How much was the bonus granted to Siong?
2. How much was the net income realized by the partnership for current year?
3. What is Villamor’s profit share?
4. What is the capital balance of Siong on December 31, 2011?

Solution:
Cal, Capital 12/31/2011 2,820,000
Withdrawal 180,000
1/31/2011 Contribution (2,500,000)
Share in Net income 500,000

Siong Villamor Cal Total

Interests
(1,000,000 x 12% x 11/12) 110,000 110,000
(1,500,000 x 12% x 11/12) 165,000 165,000
(2,500,000 x 12% x 11/12) 275,000 275,000
Salaries
40,000 x 11 440,000 440,000
420,000 x 11/12 385,000 385,000
Bonus 40,000 40,000
Over-allocation* (160,000) (160,000)
320,000 x 1/5 (64,000) (64,000)
320,000 x 1.5/5 (96,000)
Share in Net Income 86,000 509,000 500,000 1,095,000
(160,000) is a squeeze figure
*(160,000) divided by 2.5/5

1. Answer: P40,000
B = 0.25[(Residual + Villamor’s Salary + B)
B = 0.25 [(320,000) + 440,000 + B)
B = 30,000 + 0.25B
0.75B = 30,000  B = 30,000 / 0.75
B = P 40,000

2. Answer: P 1,095,000 (see solution above)

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 3. Answer: P 509,000 (see solution above)
4. Answer: P 1,286,000
1/ 31/2011 Contribution 1,000,000
Share in Net Income 86,000
Additional Investment 200,000
12/31/2011 1,286,000

Problem 2:
On July 1, 2011, Catipay, Olmoguez, and Alampay put up a partnership with original capital contribution ratio of 1:3:4
for a total agreed capitalization of P 2,000,000. The profit or loss ratio agreement provides that profits shall be
distributed in the ratio of 4:2:4 during the first six months of operations and in the ratio of 3:2:5 thereafter, while
losses shall be distributed in the ratio of 2:2:6. The partnership’s fiscal year runs from July 1 to June 30.

For the first fiscal year ending June 30, the partnership reported net income of P 1,200,000 with Catipay and
Olmoguez withdrawing P 50,000 and P 100,000, respectively. For the second fiscal year ending June 30, the
partnership suffered a net loss of P 250,000 with Olmoguez investing an additional P 80,000 and Alampay
withdrawing P 120,000. Assume net income is earned evenly throughout the year.

1. How much is Catipay’s share in the net income for the fiscal year ended June 30, 2012?
2. How much is Olmoguez’s share in the net income for the fiscal year ended June 30, 2012?
3. How much is Alampay’s share in the net income for the fiscal year ended June 30, 2012?
4. What is the capital balance of Catipay on June 30, 2013?
5. What is the capital balance of Olmoguez on June 30, 2013?
6. What is the capital balance of Alampay on June 30, 2013?

Solution:
1. Answer: 420,000
2. Answer: 240,000
3. Answer: 540,000

Catipay Olmoguez Alampay

6 months ending Dec. 31, 2011
1,200,000 x 6/12
600,000 x 40% 240,000
600,000 x 20% 120,000
600,000 x 40% 240,000
6 months ending June 30, 2012
600,000 x 30% 180,000
600,000 x 20% 120,000
600,000 x 50% 300,000
Share on Net Income P 420,000 P 240,000 P 540,000

4. Answer: P 570,000
5. Answer: P 920,000
6. Answer: P 1,270,000

Catipay Olmoguez Alampay

Capital balances upon formation
2,000,000 x 1/8 250,000
2,000,000 x 3/8 750,000
2,000,000 x 4/8 1,000,000
Allocation of income above 420,000 240,000 540,000
Drawings (50,000) (100,000) -
6/30/2012 – Capital Balances P 620,000 P 890,000 P 1,540,000
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Allocation of Net Loss
(250,000) x 20% (50,000)
(250,000) x 20% (50,000)
(250,000) x 60% (150,000)
Additional Investments 80,000
Drawing (120,000)
6/30/2013 – Capital balances P 570,000 P 920,000 P 1,270,000

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