Hernandez, Jessica O.

Partnership and Corporation

BSA 1-1 Chapter 3

Chapter 3- Partnership Operations

Exercises- Odd Numbers

Exercise 3-1

Capital Balances Time devoted by partners

Borres P250,000 3/4
Buendia P150,000 1/4
Bustos P100,000 1/2

Determine participation of partners in profit of P600,000.

1. In ratio of capital investments

Borres 600,000 x 25/50 = 300,000
Buendia 600,000 x 15/50 = 180,000
Bustos 600,000 x 10/50 = 120,000

2. In ratio of time devoted in the business

Borres 600,000 x 3/4 / 3/2 = 300,000 Borres 600,000 x .75/1.5 = 300,000
Buendia 600,000 x 1/4 / 3/2 = 100,000 Buendia 600,000 x .25/1.5 = 100,000
Bustos 600,000 x 1/2 / 3/2 = 200,000 Bustos 600,000 x .50/1.5 = 200,000

Exercise 3-3

Benito and Bunye

Average Capital Balances: 1,000,000 and 600,000

Schedule- Profit of 700,000

Benito Bunye Total

10% interest in excess of
partner’s average capital 40,000
1,000,000-600,000 = 400,000
400,000 x .10 = 40,000 40,000

Salaries 300,000 200,000 500,000

Remainder (ratio of 70:30)

700,000-40,000+500,000
=160,000
160,000 x 70/100 112,000
160,000 x 30/100 48,000 160,000

Total Share in Profit 452,000 248,000 700,000

 Schedule- Profit of 400,000

Benito Bunye Total

10% interest in excess of
partner’s average capital 40,000
1,000,000-600,000 = 400,000
400,000 x .10 = 40,000 40,000

Salaries 300,000 200,000 500,000

Remainder (ratio of 70:30)

400,000-40,000+500,000
= -140,000
-140,000 x 70/100 (98,000)
-140,000 x 30/100 (42,000) (140,000)

Total Share in Profit 242,000 158,000 400,000

Exercise 3-5
Capital Balances
Bueno 600,000
Beran 675,000

1. Distribute profit of P375,000.

Bueno Beran Total
8% interest on beg capital
600,000 x .08 = 48,000 48,000
675,000 x .08 = 54,000 54,000 102,000

Salaries 225,000 115,000 340,000

Remainder (ratio of 3:2)

442,000-375,000=67,000
67,000 x 3/5 = 40,200 (40,200)
67,000 x 2/5 = 26,800 (26,800) (67,000)

Total Share in Profit 232,800 142,200 375,000

2. Distribute profit of P375,000, ratio of 3:2 with 175k minimum to Beran.

Bueno Beran Total
Minimum of 175,000 to Beran. 175,000 175,000

Remainder (ratio of 3:2)

375,000-175,000=200,000
200,000 x 3/5 = 120,000 120,000
200,000 x 2/5 = 80,000 80,000 200,000

Total Share in Profit 120,000 255,000 375,000

Exercise 3-7

Computation of bonus under different individual assumptions.

: 5% bonus, 650,000 profit, 30% income tax
: profit before income tax = 650,000/.70 = 928,571

1. Bonus before deduction of bonus and income tax.

B = .05 (928,571)
= 46,429

2. Bonus after deduction of bonus but before deduction of income tax.

B = .05 (928,571-B)
= 46,429
B+.05 = 46,429
B = 46,429/1.05
B = 44,218

3. Bonus before deduction of bonus but after deduction of income tax.

B = .05(928,571-T)

T = .30 x 928,571
= 278, 571

B = .05(928,571-278,571)
= .05(650,000)
= 32,500

4. Bonus after deduction of both bonus and income tax.

B = .05(928,571-T-B)

T = .30 x 928,571
= 278, 571

B = .05(928,571-278,571-B)
= .05(650,000)
= 32,500
= 32,500/1.05
= 30,952

Exercise 3-9

Barte, a partner in BBB Partnership has a 25% participation in profit. Barte’s capital account had a net
decrease of 240,000 during the year 2014. During 2014, Barte withdrew 520,000 (charged against
capital account) and invested in the partnership a property with a fair value of 100,000.

-Get the decrease in Barte’s Capital:

520,000 (withdrawal) – 100,000 (investment) = 420,000
-Compare to net decrease:
420,000 – 240,000 = 180,000
-Divide to Barte’s participation in profit:
180,000/.25 = 720,000 (profit of BBB Partnership)
 Problems- Even Numbers

Problem 3-2

Bernal, Capital Burgos, Capital

10/31 60,000 1/1 360,000 6/30 180,000 1/1 440,000
5/31 100,000 10/31 140,000

Profit is 350,000.

1. Schedule of Profit Distribution (as accdg to given conditions)

Bernal Burgos Total
8% interest on beg capital
360,000 x .08 = 28,800 28,800
440,000 x .08 = 35,200 35,200 64,000

Remainder (ratio of 3:1)

350,000 – 64,000 = 286,000
286,000 x 3/4 = 214,500 214,500
286,000 x 1/4 = 71,500 71,500 286,000

Total Share in Profit 243,300 106,700 350,000

Income Summary 350,000
Bernal, Capital 243,300
Burgos, Capital 106,700

2. Schedule of Profit Distribution (as accdg to given conditions)

Bernal Burgos Total
Salaries 70,000 130,000 200,000

12% interest on ending capital

400,000 x .12 = 48,000 48,000
500,000 x .12 = 60,000 60,000 108,000

Remainder (divide equally)

350,000 – 308,000 = 42,000
42,000/2 21,000 21,000 42,000

Total Share in Profit 139,000 211,000 350,000

Income Summary 350,000
Bernal, Capital 139,000
Burgos, Capital 211,000

*Computation of Ending Balances

Bernal = 360,000 + 100,000 – 60,000 = 400,000
Burgos = 440,000 + 140,000 – 80,000 = 500,000
 3. Schedule of Profit Distribution (as accdg to given conditions)
Bernal
Period Capital Balance No. of Months Peso Months
Unchanged
1/1-5/30 360,000 5 1,800,000
5/31-10/30 460,000 5 2,300,000
10/31-12/31 400,000 2 800,000
12 4,900,000
Average Capital Balance: 408,333
Burgos
Period Capital Balance No. of Months Peso Months
Unchanged
1/1-6/29 440,000 6 2,640,000
6/30-10/30 360,000 4 1,440,00
10/31-12/31 500,000 2 1,000,000
12 5,080,000
Average Capital Balance: 423,333

Bernal Burgos Total

Salaries 45,000 85,000 130,000

12% interest on average capital

408,333 x .12 = 49,000 49,000
423,333 x .12 = 50,800 50,800 99,800

Remainder (ratio of 3:1)

350,000 – 229,800 = 120,200
120,200 x 3/4 90,150
120,200 x 1/4 30,050 120,200

Total Share in Profit 184,150 165,850 350,000

Income Summary 350,000
Bernal, Capital 184,150
Burgos, Capital 165,850

4. Schedule of Profit Distribution (as accdg to given conditions)

Bernal Burgos Total
Salaries 50,000 100,000 150,000

10% interest on average capital

408,333 x .10 = 40,833 40,833
423,333 x .10 = 42,333 42,333 83,166

Remainder (ratio oof 40% and

60%)
350,000 – 233,166 = 120,200
116,834 x .40 46,734
116,834 x .60 70,100 116,834

Total Share in Profit 137,567 212,433 350,000

Income Summary 350,000
Bernal, Capital 137,567
Burgos, Capital 212,433
 5. Schedule of Profit Distribution (as accdg to given conditions)
Bernal Burgos Total
8% interest on beginning capital
360,000 x .08 = 28,800 28,800
440,000 x .08 = 35,200 35,200 64,000

Salaries 50,000 50,000 100,000

Bonus- 10% after interest and

salaries
350,000 – 164,000 = 186,000/.10 18,600 18,600

Remainder (ratio of 2:3)

350,000 – 182,600 = 167,400
167,400 x 2/5 = 66,960 66,960
167,400 x 3/5 = 100,440 100,440 167,400

Total Share in Profit 164,360 185,640 350,000

Income Summary 350,000
Bernal, Capital 164,360
Burgos, Capital 185,640

Problem 3-4

1. Schedule of Profit Distribution (as accdg to given conditions)- 2,100,000 profit

Basa Benito Beltran Bagnes Total
Salaries 400,000 200,000 600,000

Bonus
B = .05 x 2.1M
= 105,000/1.05
= 100,000
100,000 x 3/5 60,000
100,000 x 2/5 40,000 100,000

10% interest on
average capital
1,000,000 x .10 100,000
900,000 x .10 90,000
400,000 x .10 40,000
940,000 x .10 94,000 324,000

Remainder (divided
equally)
2,100,000-1,024,000 269,000 269,000 269,000 269,000 1,076,000
= 1,076,000 / 4

Total Share in Profit/

Loss 829,000 599,000 309,000 363,000 2,100,000
 2. Schedule of Profit Distribution (as accdg to given conditions)- 800,000 loss
Basa Benito Beltran Bagnes Total
Salaries 400,000 200,000 600,000

10% interest on
average capital
1,000,000 x .10 100,000
900,000 x .10 90,000
400,000 x .10 40,000
940,000 x .10 94,000 324,000

Remainder
924,000 + 800,000
=1,724,000 / 4 (431,000) (431,000) (431,000) (431,000) (1,724,00)

Total Share in Loss 69,000 (141,000) (391,000) (337,000) (800,000)

3. Schedule of Profit Distribution (as accdg to order of priority provision)- 800,000 profit
Basa Benito Beltran Bagnes Total
10% interest on
average capital
1,000,000 x .10 100,000
900,000 x .10 90,000
400,000 x .10 40,000
940,000 x .10 94,000 324,000

Bonus
B = .05 x 800,000
= 40,000/1.05
= 38,095/38,094
38,095 x 3/5 22,857
38,095 x 2/5 15,238 38,095

Salaries
800,000-324,000-
38,095 = 437,905
437,905 x 400/600 291,937
437,905 x 200/600 145,968 437,906

Total Share in Profit 414,794 251,206 40,000 94,000 800,000

 Problem 3-6

1. Determining the profit/loss of the partnership.

a. OpEx Computation
Operating Expenses 300,000
Less: Supplies on Hand 12,500
Prepaid Expenses 5,000
Add: Accrued Expenses 17,000
Depreciation Exp 30,000 Computation of Dep Expense: 225,000 x. 20 x 8/12
Adjusted OpEx 330,000

b. Net Sales Computation c. COGS Computation

Sales 1,525,000 Purchases 980,000
Less: Sales Returns Less: Ending
and Allowances 25,000 Merchandise Inventory 305,000
Net Sales 1,500,000 Cost of Goods Sold 675,000

d. Net Income/Loss
Net Sales 1,500,000
Less: COGS 675,000
Gross Profit 825,000
Less: OpEx 330,000
Income Before Tax 495,000
Less 30% Income Tax 148,500 = 495,000 x .30
Net Income 346,500

2-3. Distribution of Profit and Ending Capital Balances of the Partners.

Brenda Brosas Total

Salaries (150,000 x 8/12) 100,000 100,000

Given 10% of profit after salary

346,500-100,000=246,500 x .10 24,650 24,650

Remainder (ratio of orginal

capital balances)
346,500 – 124,650 = 221,850
221,850 x 625/1000 138,656
221,850 x 375/1000 83,194 221,850

Total Share in Profit 263,306 83,194 346,500

Add: Equity, Jan 1 625,000 375,000 1,000,000

Total 888,306 458,194 1,346,500

Less: Withdrawals 100,000 150,000 250,000

Equity, Dec 31, Ending Capital 788,306 308,194 1,096,500
 Problem 3-8

BACANI, BADEO & BARTE

Statement of Changes in Partners’ Equity
For the year Ended Dec 31, 2012
Bacani Badeo Balte Total
Equity, Jan 1, 2012 1,000,000 500,000 400,000 1,900,000

Add Profit:
Interest on beg capital 60,000 30,000 24,000 114,000
Salaries 96,000 120,000 120,000 336,000
Remainder (164,000) (164,000) (164,000) (492,000)
Total Share in Profit/Loss (8,000) (14,000) (20,000) (42,000)

TOTAL 992,000 486,000 380,000 1,858,000

Less: Withdrawals (72,000) (86,800) (96,000) (254,800)

Equity, Dec 31, 2012 920,000 399,200 284,000 1,603,200

BACANI, BADEO & BARTE

Statement of Changes in Partners’ Equity
For the year Ended Dec 31, 2013

Bacani Badeo Balte Total

Equity, Jan 1, 2013 920,000 399,200 284,000 1,603,200

Add Profit:
Interest on beg capital 55,200 23,952 17,040 96,192
Salaries 96,000 120,000 120,000 336,000
Remainder (44,000) (44,000) (44,000) (132,000)
Total Share in Profit/Loss 107,200 99,952 93,040 300,192

TOTAL 1,027,200 499,152 377,040 1,903,392

Less: Withdrawals (139,600) (163,200) (177,200) (480,000)

Equity, Dec 31, 2013 887,600 335,952 199,840 1,423,392

 BACANI, BADEO & BARTE
Statement of Changes in Partners’ Equity
For the year Ended Dec 31, 2014
Bacani Badeo Balte Total
Equity, Jan 1, 2014 887,600 335,952 199,840 1,423,392

Add Profit:
Interest on beg capital 53,256 20,157 11,990 85,403
Salaries 96,000 120,000 120,000 336,000
Bonus 8,100 8,100
Remainder 13,499 13,499 13,499 40,497
Total Share in Profit/Loss 170,855 153,656 145,489 470,000

TOTAL 1,058,455 489,608 345,329 1,893,392

Less: Withdrawals (163,200) (195,200) (169,600) (528,000)

Equity, Dec 31, 2014 895,255 294,408 175,729 1,365,392

Multiple Choice-1 Answers Multiple Choice-2 Answers

1.C. 1.D.
2.B. 2.B.
3.A. 3.A.
4.D. 4.C.
5.B. 5.C.
6.C. 6.C.
7.C. 7.C.
8.B. 8.B.
9.B. 9.B.
10.C. 10.B.
11.C. 11.D.
12.C. 12.C
13.A. 13.A.
14.D. 14.C.
15.B.