• Philippine Normal University

• CBIBE 101

Partnership Operations

Sample Problems

Problem 1

Solution:

Cortez Padua Valmoria Total

Salaries 40,00 40,000 80,000

Bonus 1,000 1,000

Remainder – 3:4:3 3,000 4,000 3,000 10,000

Profit 43,000 44,000 4,000 91,000

Bonus = Bonus rate x (Income before income tax – Salaries – Bonus)

Bonus = .10 x (91,000 – 80,000 – Bonus)

B = .10 x (11,000 – Bonus)

B = 1,100 - .10B

B + .10B = 1,100

1.10B = 1,100

1.10B/1.10 = 1,100/1.10

Bonus = ₱1,000

Problem 2

Solution:

Mariano Ellen Cassandra Total

Salaries 1,250 1,250 2,500

Interest 1,500 1,187.50 1,062.50 3,750

Bonus 8,250 8,250

Remainder (25%:35%:40%) 13,750 19,250 22,000 55,000

Profit 24,750 21,687.50 23,062.50 69,500

Bonus = Bonus rate x (Income before income tax – Salaries – Interest – Bonus)

Bonus = .15 x (69,500 – 2,500 – 3,750 – Bonus)

B = .15 x (63,250 – Bonus)

B = 9,487.50 - .15B

B + .15B = 9,487.50

1.15B = 9,487.50

1.15B/1.15 = 1,100/1.15

Bonus = ₱8,250

Problem 3

Solution:

Ricardo Dalisay Total

Salaries 261,000 259,000 520,000

Interest 27,500 27,500 55,000

Income 288,500 286,500 575,000

Partnership Operations

Sample Problems

Assume that on January 01, 2020, Siy and Tiu formed a partnership with an investment of ₱30,000 and ₱60,000,

respectively. On December 31, 2020, after closing all income and expense accounts, the Income Summary account

shows a credit balance of ₱60,000 representing profit for the year 2020. Changes in the capital accounts during

2020 are summarized as follows:

Siy Tiu

Capital balances, January 01, 2020 40,000 60,000

Additional investments, March 01, 2020 20,000 50,000

Additional investments, August 01, 2020 20,000 40,000

Withdrawal, October 01, 2020 (20,000)

Withdrawal, November 01, 2020 (50,000)

Capital balances, December 31, 2020 60,000 100,000

Prepare journal entry to record division of net income for 2020 under the following independent cases:

A. The partnership agreement provides for an annual salary of ₱30,000 to Siy and ₱20,00O to Tiu with the

resultant net income or loss to be divided equally.

B. Assume that the partnership operation results at a loss of ₱20,000. The partnership agreement provides

for an annual salary of ₱30,000 to Siy and ₱20,000 to Tiu, with the resultant net income or loss to be

divided equally.

C. Assume that the partnership operation results at a profit of ₱30,000. The partnership agreement provides

that salaries are allowed to the extent of earnings only, then no salaries are allowed when a loss occurs.

The partnership agreement provides for an annual salary of ₱24,000 to Siy and ₱36,000 to Tiu.

D. Assume that the partnership of Siy and Tiu has a net income of ₱190,200 before salaries, interest and

bonus to partners. The partnership contract provides the following:

i. Salaries to Siy and Tiu, ₱30,000 each

ii. Interest on capital account balances: Siy, ₱7,000; Tiu, 3,200

iii. Bonus to Siy, 20% of net income, bonus is based on net income before allowances for salaries,

interest and bonus.

iv. Remaining profit or loss after salaries, interest and bonus, equally divided.

E. Assume information on question F, except that bonus is based on net income before allowances for

salaries and interest but after deduction of bonus.

F. Assume information on question F, except that bonus is based on net income after allowances for salaries

and interest but before bonus.

G. Assume information on question F, except that bonus is based on net income after allowances for salaries

and interest and bonus.

Partnership Operations

Sample Problems

Answer Key

A. Solution

Siy Tiu Total

Salaries 30,000 20,000 50,000

Remainder (50:50) 5,000 5,000 10,000

Net income 35,000 25,000 60,000

Income Summary 60,000

Siy, Capital 35,000

Tiu, Capital 25,000

B. Solution

Siy Tiu Total

Salaries 30,000 20,000 50,000

Remainder (50:50) (35,000) (35,000) (70,000)

Net loss (5,000) (15,000) (20,000)

Siy, Capital 5,000

Tiu, Capital 15,000

Income Summary 20,000

C. Solution

Siy Tiu Total

Salaries 12,000 18,000 30,000

Net income 12,000 18,000 30,000

Siy 30,000 x 24,000/60,000 = 12,000

Tiu 30,000 x 36,000/60,000 = 18,000

D. Solution

Siy Tiu Total

Salaries 30,000 30,000 60,000

Interest 7,000 3,200 10,200

Bonus 38,040 38,040

Remainder (50:50) 40,980 40,980 81,960

Net income 116,020 74,180 190,200

Bonus = Bonus rate x Basis

Bonus = 20% x Net income before salaries, interest & bonus

B = .20 x 190,200

B = 38,040

Income Summary 190,200