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• Zenaida Rivadelo opted for an early retirement from a business process outsourcing company
located in The Fort, Taguig City and returned to Dagupan. She was presented with a business
opportunity by her niece, Helen Mamitag, who has a B.S. Degree in Computer Science. Rivadelo
and Mamitag formed a partnership called The InfoTech Consultants. Rivadelo contributed all the
P700,000 initial capital. She only devotes one-half time to the business. Mamitag, the industrial
partner, works full time. The monthly drawings were P50,000 for Rivadelo and P75,000 for
Mamitag.
At the end of the first year of operations, the two partners talked about establishing an agreement
to govern the division of the partnerships’ profits or losses. Rivadelo proposed that the division be
equal. Although she devoted only one-half of Mamitag’s work time to the business, she
contributed all of the startup funds and is the more experienced in this line of business. Mamitag
suggested that the income-sharing ratio should be 2:1 in her favor because she works full time in
the business though she appreciates her bigger monthly drawings.
Required:
San Mateo’s
Book Value Fair Market Value
Accounts Receivable P72,000 P72,000
Allowance for Uncollectible Accounts -0- 10,500
Merchandise Inventory 223,400 241,000
Prepaid Expenses 17,000 17,000
Office Equipment 459,000 276,000
Accumulated Depreciation 153,000 -0-
Accounts Payable 191,000 191,000
On June 30, Caballes invested cash in an amount equal to the current market value of San Mateo’s partnership
capital. San Mateo, the managing partner, would earn two-thirds of partnership profits. Caballes agreed to accept
one-third of the profits.
During the remainder of the year, the partnership earned P450,000. the temporary withdrawals of San Mateo and
Caballes were P352,000 and P230,000, respectively.
Required:
1. Journalize the partner’s initial investments in a new set of books.
2. Prepare the partnership’s statement of financial position immediately after its formation on June 30.
3. Journalize the entries to close the income summary and the drawing accounts.
Problem #3: Rules for the Distribution of Profit or Losses
• Elisa Diaz and Ma. Concepcion Manalo formed a partnership, investing P330,000 and P110,000,
respectively. Determine the partner’s participation in the 2018 profit of P420,000 under each of the
following independent assumptions:
c. Interest at the rate of 8% allowed on original investments and the remainder divided in the ratio
of 2:3.
d. Salary allowances of P50,000 and P70,000, respectively, and the balance to be divided equally.
• Laguna and Cadelina share profits and losses on a fractional-share basis with two-
fifths for Laguna and three-fifths for Cadelina. This year the firm has profits of
P650,000. the beginning Capital balances for the year were P900,000 for Laguna and
P1,300,000 for Cadelina. The balances of the Drawing accounts are P300,000 for
Laguna and P240,000 for Cadelina.
Required:
Journalize the entries to close income summary and the partners’ drawing accounts
on Dec. 31.
Problem #8: Rules for the Distribution of Profits or Losses.
• Baral and Malaluan are in partnership. On July 1, 2018, Castro joined the
partnership. Profit sharing arrangements are:
6 months to 6 months to
June 30, 2018 Dec. 31, 2018
Salaries Baral P15,000 P25,000
Balance to be Divided: Baral 60% 40%
Malaluan 40% 40%
Castro 20%
The partnership profit for the year ended Dec. 31, 2018 was P350,000 accruing
evenly over the year.
Required:
Required:
1. Prepare the journal entry to record the investment of both partners in the partnership.
2. Determine the share of profit for each partner in 2018 and 2019 under each of the following
questions.
a. The partners agreed to share profit equally.
b. The partners failed to agree on a profit-sharing arrangement.
c. The partners agreed to share profit according to the ratio of their original investments.
d. The partners agreed to share profits by allowing interest of 10% on their original investments
and dividing the remainder equally.
e. The partners agreed to share profits by allowing salaries of P400,000 for Marasigan and
P280,000 for Asacta, and dividing the remainder equally.
f. The partners agreed to share profits by paying salaries of P400,000 to Marasigan and P280,000
to Asacta, allowing interest of 9% on their original investments, and dividing the remainder equally.
Problem #10: Rules for the Distribution of Profits or Losses.
• Stephanie Calamba and Allan Brillantes decided to form a partnership. They agreed that Calamba
will invest P200,000 and Brillantes, P300,000. Calamba will devote full-time to the business, and
Brillantes on part-time only. The following plans for the division of profits are being considered:
a. Equal division.
b. In the ratio of original capital investments.
c. In the ratio of time devoted to the business.
d. Interest of 10% on original investments and the remainderin the ratio of 3:2.
e. Interest of 10% on original investments, salary allowances of P340,000 to Calamba and
P170,000 to Brillantes, and the remainder equally.
f. Plan (e), except that Calamba is also to be allowed a bonus equal to 20% of the amount by
which profit exceeds the salary allowances.
Required:
Determine the partners’ share in the profit or loss for each of the situations above assuming: (1) profit
of P1,500,000 and (2) profit of P660,000.
Problem #11: Establishing the Profit Distribution Scheme
• Tria and Resulta established a consultancy partnership in 2016. they will work full time in the firm.
Tria will make an initial investment of P450,000 and Resulta, P350,000. they are considering the
following independent schemes for the division of profits:
Required:
1. Prepare the profit distribution schedule for the above schemes assuming a:
a. Profit of P500,000
b. Profit of P240,000
Required:
1. Profit of P740,000
2. Profit of P140,000
3. Loss of P60,000
Problem #13: Distribution of Profits or Losses Based on Partner’s
Agreement
• Pasia, Te, and Ocenar each receive a P70,000 salary, as well as 15% interest on
their respective average investments of P200,000, P100,000, and P400,000. If they
share remaining profits and losses in a 4:3:2 ratio, respectively, by how much would
Ocenar account increase or decrease (indicate a decrease by placing parentheses),
assuming: (a) profit of P405,000 (b) profit of P270,000, and (c) loss of P315,000. In
addition, calculate (d) Ocenar share of a P350,000 profits if profit and loss distribution
were based instead solely on the ratio of average investments.
Problem #14: Distribution of Profits or Losses Based on
Partner’s Agreement
• Buenviaje and Refozar are partners in a business. Buenviaje’s original capital contribution was
P400,000, and Refozar was P600,000. They agreed to share profits and losses as follows:
Buenviaje Refozar
Calculate each partner’s share of profits and losses, assuming: (a) profit was P1,000,000,
(b) profit was P700,000, and (c) loss was P80,000.
Problem #15: Distribution of Profits or Losses Based on Partner’s
Agreement
• A summary of changes in the capital accounts of the Rialubin, Rabena and Dela Cruz partnership
for 2018, before closing, follows:
Required:
Determine the allocation of the 2018 profit to the partner’s under each of the following
independent assumptions:
1. Profit is P48,000 and profit is divided on the basis of average capital balances.
2. Profit is P50,000. Rialubin receives a bonus of 10% of profit for managing the business, and the
balance to be divided on the basis of beginning capital balances.
3. Loss is P35,000, each partner is allowed 10% interest on beginning capital balances and the
balance to be divided equally.