Home

B-ACTG328 BSA33 ACCOUNTING FOR SPECIAL TRANSACTIONS 2nd

Sem ( 2022-2023 )

Partnership Operation/Division of Profit or Loss

Practice Exercise # 2

Submissions
Here are your latest answers:

Question 1
Partnership bonus arrangements must consider net income as part of the bonus calculation.

Response: False

Score: 1 out of 1 Yes

Question 2
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

Response: increase more than Olson's

Score: 1 out of 1 Yes

Question 3
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 net profit after adjustment for the salary; the balance of the profit was to be
divided in the ratio of their 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 & 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 7 Fixtures is to be computed at
20% per year. Income tax rate is 35%.

1. The distribution of net profit to Mariano is _____. (Please do not use peso sign, comma, and decimal.)

Response: 20342

Score: 1 out of 1 Yes

Question 4
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 disclosed however, that the errors shown below were made:

Errors 2017 2018

Accrued expenses not recorded at year-end 12,000
Inventory overstated 31,000
Purchases not recorded, for which goods have been received and inventoried 20,000
Income received in advance not adjusted 15,000
Unused supplies not take up at year-end 9,000
1. The new profit and loss ratio of Soriano is _____. (express in percentage)

Response: 16%

Score: 1 out of 1 Yes

Question 5
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 net profit after adjustment for the salary; the balance of the profit was to be
divided in the ratio of their 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 & 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 7 Fixtures is to be computed at
20% per year. Income tax rate is 35%.

1. After closing the net profit and drawing accounts, the capital of Mariano is _____. (Please do not use
peso sign, comma, and decimal.)

Response: 125342

Score: 1 out of 1 Yes

Question 6
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 stated that 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 withdrew P70,000 from the partnership on September 30,2018.

c. Share on the remaining profit was P3,000 for each partner.

1. The average capital of Tamayo is _____. (Please do not use peso sign, comma, or decimal.)

Response: 48750

Score: 0 out of 1 No

Question 7
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 interest 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 _____________
Response: P214,600

Score: 1 out of 1 Yes

Question 8
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 disclosed however, that the errors shown below were made:

Errors 2017 2018

Accrued expenses not recorded at year-end 12,000
Inventory overstated 31,000
Purchases not recorded, for which goods have been received and inventoried 20,000
Income received in advance not adjusted 15,000
Unused supplies not take up at year-end 9,000

1. Assuming that income tax rate is 35%, the share of Madrid in the corrected net profit is _____. (please
do not use peso sign, comma , and decimal)

Response: 57660

Score: 1 out of 1 Yes

Question 9
Bonus to partners can be based on any criteria on which the partners agree.

Response: True

Score: 1 out of 1 Yes

Question 10
The most appropriate basis for dividing partnership net income when the partners do not plan to take an
active role in daily operations is
Response: on a ratio based average capital balances

Score: 1 out of 1 Yes

Question 11
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?

Response: P290,000

Score: 1 out of 1 Yes

Question 12
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 on 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 that 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.

1. Assuming a net profit of P44,000 for the year, the profit share of Velasco was _____. (pleas do not use
peso sign, comma, and decimal)

Response: 19400

Score: 1 out of 1 Yes

Question 13
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 disclosed however, that the errors shown below were made:

Errors 2017 2018

Accrued expenses not recorded at year-end 12,000
Inventory overstated 31,000
Purchases not recorded, for which goods have been received and inventoried 20,000
Income received in advance not adjusted 15,000
Unused supplies not take up at year-end 9,000

1. Assuming that income tax rate is 35%, the share of Soriano in the corrected net profit is _____. (please
do not use peso sign, comma , and decimal)

Response: 38440

Score: 1 out of 1 Yes

Question 14
Karen and Andrea are currently changing their partnership profit and loss ratios from 75/25 to 60/40. They
have created a list of assets that have market and book value differences. One of the assets is a building
with a P300,000 market value and P200,000 book value. Two years after changing the profit and loss
ratios, the building is sold for P380,000.

1. How much of the profit is allocated to Andrea? _____ (Do not use comma, peso sign, or decimal.)

Response: 57000

Score: 1 out of 1 Yes

Question 15
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 on 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 that 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.

1. Assuming a net profit of P44,000 for the year, the profit share of Torres was _____. (Please do not use
peso sign, comma, and decimal. Use parentheses to indicate negative sign.)

Response: 7800

Score: 1 out of 1 Yes

Question 16
Chris is a partner in a local partnership. The profit and loss sharing agreement includes an interest
allocation of 7 percent on the invested capital. The capital account of Chris reveals that he had a beginning
capital account balance of P50,000. He withdrew P10,000 on May 1 and invested P25,000 on October 31.

1. Rounded to the nearest peso, what is Chris’ weighted average capital balance? _____ (Do not use
comma, peso sign, or decimal.)

Response: 47500

Score: 1 out of 1 Yes

Question 17
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?

Response: P52,000

Score: 1 out of 1 Yes

Question 18
Richard is a partner in a local partnership. The profit and loss sharing agreement includes an interest
allocation of 8 percent on the invested capital. Richard had a beginning capital balance of P60,000. He
invested P30,000 on March 1, withdrew P20,000 on August 1, and invested P40,000 on December 1.

1. Rounded to the nearest peso, what amount is allocated to Richard as interest on capital balance if the
weighted average capital balance is used as the basis of the computation? _____ (Do not use comma, peso
sign, or decimal.)

Response: 6400

Score: 1 out of 1 Yes

Question 19
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 on 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 that 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.

1. Assuming a net profit of P44,000 for the year, the profit share of Sison was _____. (pleas do not use
peso sign, comma, and decimal)

Response: 16800

Score: 1 out of 1 Yes

Question 20
Jennifer and Robert are partners who are changing their profit and loss ratios from 60/40 to 45/55. At the
date of the change, the partners choose to revalue assets with market value different from book value. One
asset revalued is land with a book value of P50,000 and a market value of P120,000. Two years after the
profit and loss ratio is changed, the land is sold for P200,000.

1. What is the amount of change to Jennifer’s capital account at the date the land is revalued? _____ (Do
not use comma, peso sign, or decimal.)

Response: 42000

Score: 1 out of 1 Yes

Question 21
Maxwell is trying to decide whether to accept a salary of P60,000 or a salary of P25,000 plus a bonus of
20% of net income after salaries and bonus as a means of allocating profit among the partners. Salaries
traceable to the other partners are estimated to be P75,000.

1. What amount of income would be necessary so that Maxwell would consider the choices to be equal?
_____ (Do not use comma, peso sign, or decimal.)

Response: 310000

Score: 1 out of 1 Yes

Question 22
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 capital balance of P220,000. During 2018, Hope made additional investment of
P50,000 on Aril 1 and withdrew P70,000 of her capital on September 30. Faith, on the other hand, made
additional investment of of P80,000 on October 1.

The share of Hope in the net profit using the ratio of weighted average capital is __

Response: P117,500

Score: 1 out of 1 Yes

Question 23
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?

Response: P-0-

Score: 1 out of 1 Yes

Question 24
On January 1,20x4, the dental partnership of LL, CC, and RR was formed when the partners contributed
P20,000, P60,000, and P50,000, respectively. Over the next three years, the business reported net income
and (loss) as follows: 20x4, P (30,000); 20x5, P20,000 and 20x6, P40,000. During this period, each
partner withdrew cash of P10,000 per year. RR invested an additional 12,000 in cash on February 9, 20x5.
At the time that the partnership was created, the three partners agreed to allocate all profits and losses
according to a specified plan written as follows:

• Each partner is entitled to interest computed at the rate of 12 percent per year based on the individual
capital balances at the beginning of that year.
• Because of prior work experience, LL is entitled to an annual salary allowance of P12,000, and CC is
credited with P8,000 per year.
• Any remaining profit will be split as follows: LL, 20 percent; CC, 40 percent; and RR, 40 percent. If a
loss remains, the balance will be allocated: LL, 30 percent; CC, 50 percent; and RR, 20 percent.

1. Determine the ending capital balance of CC as of the end of three years. _____ (Do not use comma,
peso sign, or decimal.)

Response: 36243

Score: 1 out of 1 Yes

Question 25
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 on 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 that 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.

1. Assuming a net profit of P22,000 for the year, the profit share of Sison was _____. (pleas do not use
peso sign, comma, and decimal)

Response: 8800

Score: 1 out of 1 Yes

Question 26
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 disclosed however, that the errors shown below were made:

Errors 2017 2018

Accrued expenses not recorded at year-end 12,000
Inventory overstated 31,000
Purchases not recorded, for which goods have been received and inventoried 20,000
Income received in advance not adjusted 15,000
Unused supplies not take up at year-end 9,000

1. The new profit and loss ratio of Jaime is _____. (express in percentage)

Response: 40%

Score: 1 out of 1 Yes

Question 27
If a partnership makes a payment on behalf of a partner, a withdrawal has occurred.

Response: True

Score: 1 out of 1 Yes

Question 28
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 interest 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 after bonus, salary allowances, and interest on capital, the total
share of C in the partnership is _____________.

Response: P183,500

Score: 1 out of 1 Yes

Question 29
PP, SS, and TT have operated a bookstore for a number of years as a partnership. At the beginning of
20x4, capital balances were as follows: PP, P60,000; SS, P40,000 and TT, P20,000. Due to a cash
shortage, PP invests an additional P8,000 in the business on April 1, 20x4. Each partner is allowed to
withdraw P1,000 cash each month. The partners have used the same method of allocating profits and
losses since the business’ inception:

• Each partner is given the following compensation allowance for work done in the business: PP, P18,000;
SS, P25,000; and TT, P8,000.
• Each partner is credited with interest equal to 10 percent of the average monthly capital balance for the
year without regard for normal drawings.
• Any remaining profit or loss is allocated 4:2:4 to PP, SS, and TT, respectively. The net income for 20x4
is P23,600. Each partner withdraws the allotted amount each month.

1. What is the ending capital balance of PP for 20x4? _____ (Do not use comma, peso sign, or decimal.)
Response: 64600

Score: 1 out of 1 Yes

Question 30
The partnership agreement of JJ, KK, and LL provides for the annual allocation of the business’s profit or
loss in the following sequence:

• JJ, the managing partner, receives a bonus equal to 20 percent of the business’s profit.
• Each partner receives 15 percent interest on average capital investment.
• Any residual profit or loss is divided equally.

The average capital investments for 20x4 were as follows: JJ, P100,000; KK, P200,000, and LL,
P300,000.

1. How much of the P90,000 partnership profit for 20x4 should be assigned to LL? _____ (Do not use
comma, peso sign, or decimal.)

Response: 39000

Score: 1 out of 1 Yes

Previous Continue