Partnership

John Patrick S. Desepida CPA, CTT

Discussion Problem 1:
A partnership has the following accounting amounts:

Sales 700,000
Cost of good sold 400,000
Operating expenses 100,000
Salary allocation to partners 130,000
Interest paid to banks 20,000
Partners’ drawings 80,000

What is the partnership net income (loss)?

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Discussion Problem 2:

The ABC Partnership reports net income of 60,000. If partners A, B, and C

have income ratio of 50%, 30% and 20% respectively. What is the share of
Partner C from the net income of the partnership, if he was given a capital
ratio of 25%

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Problem Discussion 3:
RIZZ, IZZA and LYN are partners in a wholesale business. Their capital
accounts in the RIZZALYN Partnership for 2030 were as follow:
RIZZ IZZA LYN
January 1, balance 135,000 180,000 75,000
March 1, withdrawal 36,000
April 1, investment 30,000
May 1, investment 72,000
June 1, investment 27,000
August 1, withdrawal 9,000
October 1, withdrawal 54,000
December 1, investment 18,000

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For each of the following income-sharing agreements, prepare an income
distribution schedule:
a. Monthly salaries are P30,000 to Rizz, P50,000 to Izza and P45,000 to
Lyn. Rizz receives a bonus of 5% of net income after deducting her bonus.
Interest is 12% of ending capital balances. Any remainder is divided by
Rizz, Izza, and Lyn in a 25:40:35 ratio. Net income as of period end is
P2,835,000

b. Interest is 10% of weighted average capital balances. Annual salaries are

P480,000 to Rizz, P630,000 to Izza and P510,000 to Lyn. Izza received a
bonus of 25% of net income after deducting the bonus and his salary. Any
remainder is divided in a 2:3:4 ratio by Rizz, Izza, and Lyn, respectively.
Net income was 1,050,000before any allocations.
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c. Lyn receives a bonus of net income after deducting the bonus and the
salaries. Annual salaries are P600,000 to Rizz, P540,000 to Izza and
P750,000 to Lyn. Interest is 15% of the ending capital in excess of
P140,000. Any remainder is to be divided by Rizz, Izza and Lyn in the ratio
of their beginning capital balances. Net income was P1,470,000 before any
allocation.

d. Monthly salaries are P32,000 to Rizz, P40,000 to Izza and P42,000 to

Lyn. Izza receives a bonus of 10% of net income after deducting her bonus.
Interest is 25% on the excess of the ending capital balances over the
beginning capital balances. Any remainder is to be divided by Rizz, Izza
and Lyn in a 3:2:1 ratio. The income summary account has a debit balance
of P750,000 before closing.

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