Partnership Operations

Problem 1
Tin and Dory are partners. Their capital accounts during 2018 were as follows:

Tin Dory
8/23 P 3,000 1/1 P 15,000 3/5 P 4,500 1/1 P 25,000
4/3 P 4,000 7/6 P 3,500
10/31 P 6,000 10/7 P 2,500

Partnership net income is P 25,000 for the year. The partnership agreement provides for the
division of net income as follows:

 Each partner is credited 10% interest on his or her average capital

 Because of prior work experience, Tin is entitled to an annual salary of P 6,000 and Dory
is credited with P 4,000
 Any remained income or loss is to be allocated based on beginning capital.
How much of the partnership net income for 2018 should be assigned to Tin and Dory?

Problem 2
Jorge, Jenny, Kristine and Ferdy own a publishing company that they operate as a partnership.
The partnership agreement includes the following:

 Jorge receives a salary of P 10,000 and a bonus of 3% of income after all bonuses
 Jenny receives a salary of P 5,000 and a bonus of 2% of income after all bonuses
 All partners are to receive 10% interest on their average capital balances
The average capital balances are Jorge, P 25,000, Jenny, P 22,500, Kristine, P 10,000, and Ferdy,
P 23,500. Any remaining profits and losses are to be allocated equally among the partners.
Determine how a profit of P 52,500 would be allocated among the partners.

Problem 3
JC and KC are partners operating a chain of retail stores. The partnership agreement provides
for the following:

PP QQ
Salaries P 5,000 P 2,500
Interest on average 10% 10%
capital balances

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Bonus 20% if net income before interest None
but after bonus and salaries
Remainder 30% 70%

The income summary account for year 2018 shows a credit balance of P 25,500 before any
deductions. Average capital balances for JC and KC are P 25,000 and P 37,500, respectively. The
share of JC and KC in the net income would be:

Problem 4
Juan and Carlos formed a partnership on January 2, 2018 and agreed to share profits and loss in
the ratio of 90% and 10%, respectively. Juan contributed capital of P 6,250. Carlos contributed
no capital but has a specialized expertise and manages the firm full time. There were no
withdrawals during the year. The partnership agreement provides for the following:

 Capital accounts are to be credited annually with interest at 5% of the beginning capital
 Carlos is to be paid a salary of P 250 a month
 Carlos is to receive a bonus of 20% of net income calculated before deducting his salary
and interest on both capital accounts
 Bonus, interest, and YY’s salary to be considered as partnership expenses
The partnership’s income statement for 2011 follows:

Revenues P 24,112.50
Less: Expenses (including salary, interest and bonus) 12,425.00
Net Income P 11,687.50

Determine the following:

1. What is Carlos’ bonus?
2. How much is the total share of Carlos on the 2018 partnership net income?

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Problem 5
The Trading Company, a partnership, was formed on January 1, 2018, with four partners and
capital contributions as follows.

Partner Capital Contribution

Jeffrey P 25,000
Porci P 12,500
Rosas P 12,500
Virgie P 10,000

The partnership agreement provides that partners shall receive 5% interest in the amounts of
their capital contributions. In addition, Jeffrey is to receive a salary of P 2,500 and Porci a salary
of P 1,500. The agreement further provides that Rosas shall receive a minimum of P 1,250 per
annum from the partnership and Virgie a minimum of P 3,000 per annum, both including
amounts allowed as interest on capital and their respective shares of profits.
The balance of the profit is to be shared in the following proportions: Jeffrey, 30%, Porci, 30%,
Rosas, 20% and Virgie, 20%.
Calculate the amount that must be earned by the partnership during 2018, before any charges
for interest on capital or partners’ salaries, in order that Jeffrey may receive an aggregate of P
6,250 including interest, salary and share of profits.

Problem 6
The Res, Toe and Run Partnership was formed on January 2, 2018. The original cash
investments were as follows: Res – P 48,000, Toe – 72,000, and Run – P 108,000. According to
the general partnership contract, the partners were to be remunerated as follows:

 Salaries of P 7,200 for Res, P 6,000 for Toe, and P 6,800 for Run
 Interest at 12% on the average capital account balances during the year
 Remainder divided 40% to Res, 30% to Toe and 30% for Run
Income before partners’ salaries for the year ended December 31, 2018, was P 46,040. Further
information were provided as follows:

 Res invested an additional P 24,000 in the partnership on July 1

 Run withdrew P 36,000 from the partnership on October 1;
 As authorized by the Partnership contract, Res, Toe, Run each withdrew P 375 monthly
against their shares of net income for the year.
Determine:

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 1. The share of partner Res in the net Income
2. The capital balance of partner Run on December 31, 2011
3. If the salaries to partners’ are to be recognized as operating expenses by the
partnership, the share of partner Toe in the net income?
4. Using the same information in No. 3, the capital balance of partner Run on December
31, 2018

Problem 7
Jobi and Mcdo was organized and began operations on March 1, 2018. On that date:

 Jobi invested P 150,000 and Mcdo invested land and building with current fair value of
P 40,000 and P 50,000, respectively
 Mcdo also invested P 30,000 in the partnership on November 1, 2018 because of its
shortage of cash.
 The partnership contract includes the following remuneration plan:

Jobi Mcdo
Annual salary P 9,000 P 12,000
Annual interest on average capital account balances 10% 10%
Remainder 60% 40%

 The annual salary was to be withdrawn by each partner in 12 monthly installments

 During the fiscal year ended February 28, 2019, the partnership had net sales of P
250,000, cost of goods sold of P 140,000, and total operating expenses of P 50,000
(excluding partner’s salaries and interest on average capital account balances). Each
partner made monthly cash drawings in accordance with partnership contract.
Determine:
1. The share of Jobi and Mcdo in net income
2. The capital balance of each partner on March 1, 2019 should be:
3. Assuming that the annual salary are to be recognized as operating expenses and the
total operating expenses of P 50,000 includes the partners’ salaries expense but
excluding interest on partners’ average capital account balances. How much is the share
of the partners in net income in 2019?
4. Using the same information in No. 3, the capital balance of each partner on March 1,
2019 are?

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