PARTNERSHIP OPERATIONS ENABLING ASSESSMENT

1. Luz, Vi and Minda are partners when the partnership earned a profit of P30,000. Their agreement provides the
following regarding the allocation of profit and losses:
a. 8% interest in partner’s ending capital in excess of P75,000
b. Salaries of P20,000 for Luz and 30,000 for Vi
c. Any balance is to be distributed 2:1:1 for Luz, Vi and Minda, respectively.

Assume ending capital balances of P60,000, P80,000 and P100,000 for partners Luz, Vi and Minda, respectively.
What is the amount of profit allocated for Minda, if each provision of the profit and loss agreement is satisfied to
whatever extent possible using the priority order shown above?
P2,000

2. Partners AA and BB have profit and loss agreement 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 has net income of P102,500, how much should be allocated to Partner AA?
P41,000

● If the partnership has net income of P102,500, how much should be allocated to Partner BB?
P61,500

● If the partnership had net income of P22,000, how much should be allocated to partner AA, assuming that
the provision of the profit and loss agreement are ranked by order of priority starting with salaries?
P13,200
P12,000
P8,800
P12,500

3. Hope & Faith Co. reports net income after 30% tax of P235,000 by the end of 2018. The partnership agreement
provides for division of profit or loss on the ratio of the partners’ capital balances. At the end of 2017, each partner
had a capital balance of P220,000. During 2018, Hope made additional investment of P50,000 on April 1 and
withdrew P70,000 of her capital on September 30. Faith, on the other hand, made additional investment of P80,000 on
October 1.

● The share of Hope in the net profit using the ratio of weighted average capital is _
P117,500

4. The partnership agreement of Rossi and Olson provides for salary allowances of P45,000 to Rossi and P35,000 to
Olson, with the remaining income or loss to be divided equally. During the year, Rossi and Olson each withdraw cash
equal to 80% of their salary allowances. If partnership net income is P100,000, Rossi’s equity in the partnership would
Increase more than Olson’s

5. Nancy and Betty enter into a partnership agreement where they decide to share profits according to the following
rules.
● Nancy and Berry will receive salaries of P1700 and P14500 respectively as the from allocation.
● The next allocation is based on 20% of each partner’s capital balances.
● Any remaining profit or loss is to be allocated completely to betty
The partnership net income for the first year is P50,000. Nancy’s capital balance is P83,000 and Betty's capital is
P11,000 at the end of the year. Calculate the share of profit/loss to be allocated to Betty.
P31,700
6. The most appropriate basis for dividing partnership net income when the partners do not plan to take an active role
in daily operation is
On a ratio based average capital balances

7. XYZ Partnership provided for the following in the distribution of profits and losses:
First: X is to receive 10% of net income up to P100,000 and 20% of the amount in excess thereof.
Then: Y and Z are each to receive a 5% of the remaining income in excess of P150,000 after X’s share.
Lastly: The balance is to be distributed equally to the three partners.

● If the partnership income is P250,000, what is the total share of X?

P108,000

8. Tamayo, Banson and Vidal, a partnership formed on january 1, 2018, had the following initial investments.

Tamayo 100,000

Banson 150,000

Vidal 225,000

The partnership agreement profits and losses are to be shared equally by the partners after consideration is made for
the following:
a. Salaries allowed to partners: P60,000 for Tamayo; P48,000 for Banson and P36,000 for Vidal.
b. Average partner’s capital balances during the year shall be allowed 10% interest.

Additional information:
A. On June 30,2018, Tamayo invested an additional P60,000.
B. Vidal withrew P70,000 from the partnership on September 30, 2018.
C. Share on the remaining profit was P3,000 for each partner.

● The average capital of Vidal is ________.

207500

● The partnership net profit for 2018 before salaries, interest and partner’s share on the remainder is
_______.
201750

● The average capital of Tamayo is ________.

130000

● Interest on average capital balances of the partners totals

48750

● Total Partnership Capital

666750

9. Mariano and Lucas entered into partnership on March 1, 2018, investing P125,000 and P75,000 respectively. It was
agreed that Mariano, the managing partner, was to receive a salary of P12,000 per year and also 10% bonus on the
profit after adjustment for the salary, the balance of the profit was to be divided in the ratio of the original capital. On
December 31, 2018, account balances are as follows:
 Cash 70,000 Accounts payable 60,000

Accounts receivable 67,000 Sales 233,000

Furniture and Fixtures 45,000 Mariano, Capital 125,000

Purchases 196,000 Lucas Capital 75,000

Sales returns & allowances 5,000 Mariano Drawing (20,000)

Operating expenses 60,000 Lucas Drawing (30,000)

Inventories on December 31, 2018 were merchandise, P73,000; Supplies P2,500. Prepaid insurance was P950 and
accrued liabilities totaled P1,550. Depreciation on Furniture & Fixtures is to be computed at 20% per year. Income tax
rate is 35%.

● The distribution of net profit to Mariano is _______.

20342

● The distribution of net profit to Lucas is _______.

5268

● After closing the net profit and drawing accounts, the capital of Lucas is _______.
50268

● After closing the net profit and drawing accounts, the capital of Mariano is _______.
125342

10. Sison, Torres and Velasco are partners in an accounting firm. Their capital account balances at year-end were:
Sison, P50,000; Torres, P110,000; Velasco, P50,000. They share profits and losses in a 4:4:2 ratio, after the following
terms;
a. Partners Velasco is to receive a bonus of 10% of net profit after bonus.
b. Interest of 10% shall be paid on the portion of a partner’s capital in excess of P100,000.
c. Salaries of P10,000 and P12,000 shall be paid to partners Sison and Velasco, respectively.

● Assuming a net profit of P22,000 for the year, the profit share of Sison was ________.
8800

● Assuming a net profit of P22,000 for the year, the profit share of Torres was ________.
(200)

● Assuming a net profit of P22,000 for the year, the profit share of Velasco was ________.
13400

● Assuming a net profit of P44,000 for the year, the profit share of Sison was ________.
16800

● Assuming a net profit of P44,000 for the year, the profit share of Torres was ________.
7800

● Assuming a net profit of P44,000 for the year, the profit share of Velasco was ________.
19400
11. Carlin and Maley have a partnership agreement which includes the following provisions regarding sharing net
income or net loss:
● A salary allowance of P120,000 to Carlin and P100,000 to Maley.
● An investment allowance of 10% on capital balances at the beginning of the year.
● A bonus of 20% Carlin
● The remainder to be divided 40% to Carlin and 60% to Maley.

The capital balance on January 1, 2018 for Carlin and Maley was P90,000 and P120,000, respectively. During 2018,
the Carlin and Maley partnership had sales of P2,000,000 cost of goods sold of P1,100,000 and operating expenses of
P400,000. Income tax rate is 30%.

● If bonus is computed based on net income before bonus, salary allowances, and interest on capital, the total
share of C in the partnership is __________.
P214,600

● If bonus is computed based on net income after bonus, salary allowances, and interest on capital, the total
share of C in the partnership is __________.
P183,500

12. Which one of the following would not be considered an expense of a partnership in determining income for the
period?
Salary allowance to partners

13. A partners share of net income is recognized in the accounts through

Closing entries

14. Jaime, Madrid and Soriano are partners sharing profits on a 5:3:2 ratio. On January 1, 2018, Matias was admitted
into the partnership with a 20% share in the profits. The old partners continue to participate in profits proportionate to
their original ratios. For the year 2018, the partnership books showed a net profit of P250,000. It was disclose
however, that the errors shown below were made:J
● Assuming that income tax rate is 35%, the share of Jaime in the corrected net profit is ________.
96100

● Assuming that income tax rate is 35%, the share of Madrid in the corrected net profit is ________.
57660

● Assuming that income tax rate is 35%, the share of Soriano in the corrected net profit is ________.
38440

● Assuming that income tax rate is 35%, the share of Matias in the corrected net profit is ________.
48050

● The new profit and loss ratio of Jaime is ________.

40%

● The new profit and loss ratio of Madrid is ________.

24%

● The new profit and loss ratio of Soriano is _______.

16%

15. The net income of the Rice and Wynn partnership is P120,000. The partnership agreement specifies that Rice and
Wynn have a salary allowance of P32,000 and P48,000 respectively. The partnership agreement also specifies an
interest allowance of 10% on capital balances at the beginning of the year. Each partner had a beginning capital
balance of P80,000. Any remaining net income or net loss is shared equally.

● What is Rice’s share of the P120,000 net income?

P52,000

● What is the balance of Wynn’s Capital account at the end of the year after net income has been distributed?
P148,000

16. The BLUE Company, a partnership, was formed on January 1, 2018 with four partners, Belen, Lorna, and Edna.
Capital contributions were as follows:

Belen 100,000

Lorna 50,000

Ursula 50,000

Edna 40,000

The partnership agreement provides that each partner shall receive 5% interest on the amount of his/her
capital contribution. In addition, Belen is to receive a salary of P10,000 and Lorna a salary of P6,000 per annum
which are to be charged as expenses of the business. The agreement further provides that Ursula shall receive a
minimum of P5,000 per annum from the partnership and Edna a minimum of P12,000 per annum, both including the
profits is to be distributed in the following proportion: Belen 30% Lorna 30% Ursula 20% Edna 20%.

● The amount that must be earned by the partnership during 2018, before any change for interest on capital or
partners salaries in order that Belen may receive an aggregate of P25,000 including interest, salary and
share of profits would be _________. (Disregard income tax. Round your final answer to the nearest peso.
Do not use peso sign, comma, and decimal.)
64667

● Using the amount that must be earned by the partnership during 2018, before any change for interest in capital
or partners salaries in order that Belen may receive an aggregate of P25,000, including interest, salary and
share of profits, the total earnings of Ursula would be _________. (Disregard income tax. Round your final
answer to the nearest peso. Do not use peso sign, comma, and decimal.)
9167

● Using the amount that must be earned by the partnership during 2018, before any change for interest in capital
or partners salaries in order that Belen may receive an aggregate of P25,000, including interest, salary and
share of profits, the total earnings of Lorna would be _________. (Disregard income tax. Round your final
answer to the nearest peso. Do not use peso sign, comma, and decimal.)
18500

17. On October 31, 2018, Zita and Jones formed a partnership by investing cash of P300,000 and P200,000,
respectively, The partners agreed to receive and annual salary allowance of P360,000 and to give Zita a bonus 20% of
the net income after partner’s salaries, the bonus being treated as an expense.

If the profits after salaries and bonuses are to be divided equally, and the profits on December 31, 2018 after
partner’s salaries but before bonus of Zita are P360,000, how much is the share of Zita in the profits?
P270,000
18. RK is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net
income after salaries and bonus as a means of allocating profit among partners. Salaries traceable to the other partners
are estimated to be P100,000. What amount of income would be necessary so that RK would consider choices to be
equal?
P290,000

19. A, B, and C are capitalist partners while D is an industrial partner. The partnership reported a net loss of P100,000.
How much is the share of D in the reported net loss?
P-0-

20. A partner’s share of net income is recognized in the accounts through

Closing entries

21. If the partnership agreement does not specify how income is to be allocated, profits and losses should be allocated
In accordance with their capital contribution

22. Lori and Mike enter into a partnership and decide to share profits and losses as follows:
● The first allocation is a salary allowance with Lori receiving P12,000 and Mike receiving P25,000.
● The second allocation is 20% of the partners’ capital balances at year end. On December 31, 2019, the capital
balances for Lori and Mike are P86,000 and P344,000, respectively.
● Any remaining profit or loss is allocated equally.

For the year ending December 31, 2019, the partnership reported a net loss of P122,000. The journal entry to record
the loss allocation will _______.
Debit Lori, Capital for P93,300

23. The Smith and Jones partnership agreement stipulates that profits and losses will be shared equally after salary
allowances of P120,000 for Smith and P60,000 for Jones. At the beginning of the year, Smith’s Capital account had a
balance of P240,000, while Jones’ Capital account had a balance of P210,000. Net income for the year was P150,000
The balance of Jones’ Capital account at the end of the year after closing is
P255,000

24. David, Chris, and John formed a partnership on July 31, 2019. They decided to share profits equally, but inserted a
clause in the partnership agreement where any losses would be allocated in the ratio of 5:2:3, respectively. For the
year ended December 31, 2019, the firm earned a net income of P50,000. However, for the year ended December 31,
2020, the firm incurred a loss of P60,000. Assuming that John had an initial capital contribution of P43,000 and made
no withdrawals, what is the balance of John’s capital account as of december 30, 2020? (Assume that none of the
partners made any further contributions to their capital accounts. Do not round any percentage calculations. Round all
monetary calculations to the nearest peso)
P41,667