Partnership Formation and Operations

I. A, B, and C are partners with average capital balances during 2020 of P 472,500; P 238,650; and P
162,350; respectively. The partners receive 10% interest on their average capital balances; after deducting
salaries of P 122, 325 to A and P 82,625 to C, the residual profit or loss is divided equally. In 2020, the
partnership had net loss of P 125,624 before interest and salaries to partner. What amount should A and
C capital change respectively?

II. A and B formed a 60:40 capital interest in AB Partnership with the following contribution: A – Land P
1,000,000; B – Building P 800,000 and Mortgage Payable P 50,000. They agreed that the Land will be
valued at P 1,500,000 and the mortgage will be assumed by the partnership. Part also of the agreement is
that the Building already reflects its fair value.
 Assuming A is the base, what amount should B contribute or (withdraw) to be in accordance with
their capital interest?
 Assuming B is the base, what amount should A contribute or (withdraw) to be in accordance with
their capital interest?

III. On January 1, 2020, A and B formed AB partnership with a total agreed capital of P 5,000,000 and a
capital interest ratio of 70:30. The following were ascertained during the year as to distribution of profits
and losses:
a. A will receive quarterly salaries of P 100,000.
b. 5% interest on their initial capital.
c. Any remainder will be shared by their capital interest ratio.
At the end of the year, the partnership had a P 500,000 credit balance in its income summary account.
 What is the share in the net income or (loss) or Partner A?
 What is the capital balance of Partner B on December 31, 2020?

IV. A and B decided to form a partnership on May 1, 2020, assets contributed by the partners are:

ALVIN BARNIE
Book Value Fair Value Book Value Fair Value
Cash 375,000 375,000 875,000 875,000
Merchandise Inventory 95,000 125,000
Furniture and Fixtures 350,000 312,500 872,500 937,500
Transportation equipment 3,262,500 2,812,500

The transportation equipment is subject to a mortgage loan of P 1,125,000, which is to be assumed by the
partnership. The partnership agreement provides that A and B share profits and losses of 30% and 70%
respectively. Assuming that the partners agreed to bring their respective capital in proportion to their
profit and loss ratio, using B capital as base:
 What is the additional cash to be invested (withdrawn) by A?
 What is the total agreed capital after formation?

V. P and C formed a partnership on January 1, 2018 by contributing capital of P 262,500 and P 37,500,
respectively. They agreed to share profits and losses 70% and 30% respectively. C manages the
partnership and is given a salary of P 5,000 a month and a bonus of 20% of net income before salary,
interest and bonus. Interest of 5% of the beginning capital is to be given to each partner and any reminder
is to be divided according to their profit and loss ratio. For the year ended December 31, 2018, the
partnership generated a net income of P 48,000 after salaries, interests and the bonus.
 What is the amount received by P in the distribution of profit?
 What is the amount received by C in the distribution of profit?
VI. A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment with
assessed value of P 200,000 with historical cost of P 1,600,000 and accumulated depreciation of P
1,200,000. A day after the partnership formation, the equipment was sold for P 600,000. B will contribute
a Land and Building with carrying amount of P 2,400,000 and fair value of P 3,000,000. The Land and
Building are subject to a mortgage payable amounting to P 600,000 to be assumed by the partnership. The
partners agreed that B will have 60% capital interest in the partnership. The partners also agreed that C
will contribute sufficient cash to the partnership.
 What is the total agreed capitalization of the ABC Partnership?
 What is the cash to be contributed by C in the ABC Partnership?

VII. On January 1, 2018, A, B and C formed ABC Partnership with original capital contribution of P 600,000,
P 1,000,000 and P 400,000. A is appointed as managing partner. During 2018, A, B, and C made additional
investments of P 1,000,000, P 400,000, and P 600,000, respectively. At the end of 2018, A, B, and C made
drawings of P 400,000, P 200,000, and P 800,000, respectively. At the end of 2018, the partnership had a
credit balance in the income summary account of P 2,100,000. The profit or loss agreement of the partners
is as follows:
a. 10% interest on original capital contribution of the partners.
b. Quarterly salary of P 80,000 and P 20,000 for A and B, respectively.
c. Bonus to A equivalent to 20% of Net Income after interest and salary to all partners.
d. Remainder is to be distributed equally among the partners.
What is A’s share in partnership profit for 2018?

VIII. D and E entered into a partnership on February 1, 2020 by investing the following assets:
D E
Cash 15,000
Merchandise Inventory 45,000
Land 15,000
Building 65,000
Furniture and Fixtures 100,000
The agreement between D and E provides that profits and losses are to be divided into 40% and 60% to D
and E, respectively. The partnership is to assume the P 30,000 mortgage loan on the building.
 If E is to receive a capital credit equal to his profit and loss ratio, how much cash must he invest?
 Assuming that E invests P 50,000 cash and each partner is to be credited for the full amount of the
net assets invested, the total capital of the partnership is?
 Assuming the partnership agreement provides that the partners should initially have an equal
interest in the partnership capital, what is E’s capital upon partnership formation?

IX. Cancan, a partner in the 3C Partnership, has a 30% participation in partnership profits and losses.
Cancan’s capital account had a net decrease of P 120,000 during the calendar year 2016. During 2020,
Cancan withdrew P 260,000 (charged against his capital account) and contributed property valued at P
50,000 to the partnership. What was the net profit of the 3C partnership?

X. S, T, and V are partners in an accounting firm. Their capital account balances at year-end were: S, P
50,000; T, P 110,000; V, P 50,000. They share profits and losses on a 4:4:2 ratio, after the following terms.
a. Partner V 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 P 100,000.
c. Salaries of P 10,000 and P 12,000 shall be paid to partner S and V, respectively.
 Assuming a net profit of P 44,000 for the year, the total profit share of V was?
 Assuming a net profit of P 22,000 for the year and that the partners agreed on the above order of
profit sharing provisions, the total profit share of V was?
 Assuming a net profit of P 22,000 for the year and that the partners agreed on the above order of
priority provision, the total profit share of V was?