Stew and Peed entered into a partnership on March 1, 2017 investing P2,000,000 and P1,000,000 resp

and is to receive a salary allowance of P240,000 per year and a bonus of 10% of the net profit after ded
divided in the ratio of their original capital.

Selected ledger account balances as of December 31, 2017 before adjustments showed the following:

Stew, Capital 2,000,000 Inventories on December 31, 2017 w

Stew, Drawing 200,000 Merchandise - 500,000.
Peed, Capital 1,000,000 Prepaid Insurance of 12,000 and acc
Peed, Drawing 100,000 Depreciation expense of 40,000 was
Sales 3,000,000
Sales returns and allowances 30,000
Purchases 1,800,000 Office Supplies
Operating Expenses 480,000 Merchandise Inventory
Prepaid Insurance
Accrued expense
Stew, Capital
Peed, Capital
Stew, Drawing
Peed, Drawing
Sales
Sales Returns and Allowance
Purchases
Operating Expenses
Depreciation expenses

Required:

1. Determine the profit or loss of the partnership. Assuming 30% income tax rate.
g P2,000,000 and P1,000,000 respectively. They areed that Stew is the managing partner
of 10% of the net profit after deducting salary but before bonus. The balance is to be

justments showed the following:

ventories on December 31, 2017 were as follows: Office Supplies - 8,100 ;

erchandise - 500,000.
epaid Insurance of 12,000 and accrued expenses of 4,000 were recognized.
preciation expense of 40,000 was also provided.

ffice Supplies 8,100.00

erchandise Inventory 500,000.00
epaid Insurance 12,000.00
crued expense 4,000.00
ew, Capital 2,000,000.00
ed, Capital 1,000,000.00
ew, Drawing 200,000.00
ed, Drawing 100,000.00
3,000,000.00
les Returns and Allowance 30,000.00
1,800,000.00
perating Expenses 480,000.00
preciation expenses 40,000.00

ome tax rate.

1. Determine the profit or loss of the partnership. Assuming 30% income tax ra

Sales 3,000,000.00
Less: Sales returns and allowances 30,000.00
Net Sales 2,970,000.00
Less: Cost of Sales
Purchases 1,800,000.00
Merchandise Inventory, end (500,000.00) 1,300,000.00
Gross Profit 1,670,000.00
Less: Operating expenses 480,000.00
Accrued expenses 4,000.00
Depreciation expense 40,000.00
Less: Office supplies (8,100.00)
Prepaid insurance (12,000.00) 503,900.00
Net Profit before tax 1,166,100.00
Less: Income tax 349,830.00
NET INCOME AFTER TAX 816,270.00

2. Prepare a schedule showing the distribution of partnership profit o

Stew Peed
Net Income After Tax
Salary Allowance for Stew: 240,000 * 10/12 200,000.00
(March to December)
Bonus to Stew: 616,270 * 10% 61,627.00
Allocation of remaining profit:
Stew: 554,643 * 2,000,0000/3,000,000 369,762.00
Peed: 554,643 * 1,000,000/3,000,000 184,881.00
Total Allocation 631,389.00 184,881.00

3. Prepare a Statement of Changes in Partners' Equity for the period ended Dec

STEW AND PEED PARTNERSHIP

STATEMENT OF CHANGES IN PARTNERS' EQUITY
FOR THE PERIOD ENDED DECEMBER 31, 2017

Stew Peed
Equity, March 1, 2017 2,000,000.00 1,000,000.00
Add: Profit in 2017 631,389.00 184,881.00
Total 2,631,389.00 1,184,881.00
Less: Drawings 200,000.00 100,000.00
Equity, December 31, 2017 2,431,389.00 1,084,881.00
0% income tax rate.

nership profit or loss.

Total
816,270.00
200,000.00

61,627.00

369,762.00
184,881.00
816,270.00

period ended December 31 2017.

Total
3,000,000.00
816,270.00
3,816,270.00
300,000.00
3,516,270.00
Division of Profit and Loss; Interest on Average Capital, Salaries to Partners and Bonus to the Managing

The partners of BBB Partnership are Bilbao, Bertol and Borja. During the current year, their average ca

Bilbao 560,000
Bertol 400,000
Borja 240,000

The partnership agreement provides that partners shall receive:

1. Annual allowance of 6% of their average capital balances

2.Salary allowances as follows: Bilbao - none ; Bertol - 96,000 ; Borja - 80,000
3. Bertol, who manages the business, is to receive a bonus of 25% of profit in excess of 144,000 after p
4. Residual profit will be divided in the ratio f 5:3:2

Prepare separate schedules showing how profit or loss will be divided among the three partnrs under e
The amount given in each case is the profit or loss for the year that is available for the distribution to p

1. 50,000 loss

Bilbao Bertol Borja Total

interest 33,600.00 24,000.00 14,400.00 72,000.00
salary - 96,000.00 80,000.00 176,000.00
bonus - none bc loss - -
remainder (149,000.00) (89,400.00) (59,600.00) (298,000.00)
(115,400.00) 30,600.00 34,800.00 (50,000.00)

2. 120,000 profit

Bilbao Bertol Borja Total

interest 33,600.00 24,000.00 14,400.00 72,000.00
salary - 96,000.00 80,000.00 176,000.00
bonus - di umabot ng 144k - -
remainder (64,000.00) (38,400.00) (25,600.00) (128,000.00)
(30,400.00) 81,600.00 68,800.00 120,000.00

3. 500,000 profit

Bilbao Bertol Borja Total

interest 33,600.00 24,000.00 14,400.00 72,000.00
salary - 96,000.00 80,000.00 176,000.00
bonus - 27,000.00 - 27,000.00
remainder 112,500.00 67,500.00 45,000.00 225,000.00
146,100.00 214,500.00 139,400.00 500,000.00
 Bonus to the Managing Partner)

t year, their average capital balances are as follows:

xcess of 144,000 after partners' interest and salary allowances

he three partnrs under each of the following independent cases.

for the distribution to partners.

bonus:
b = 25% (356,000 - I - S)
b = 25% (356,000 - 72,000 - 176,000)
b = 25% (108,000)
b = 27,000