PARTNERSHIP

PRACTICAL ACCOUNTING 2
from number 21 to 40
By: ANTONIO DAYAG
from: MEAH B. CUEVA

20. Gerlie, Meah and Chrissa are partners with average capital balancea during 2008
of 360,000,180,000 and 120,000, respectively. Partners receive 10% interest on
their average capital balances. After dedusting salaries of 90,000 to Gerlie and
60,000 to Chrissa the residual profit or loss is divided equally. In 2008 the
parnership sustained a 99,000 loss before interest and salaries to partners. By
what amount should Gerlie Capital accout change?

a. 21,000 increases c. 126,000 increases

b. 33,000 decreases d. 105,000 decreases

22. AA and DD created a partnership to own and operate a health-food store. The
partnership agreement provided that AA receive a salary of 10,000 and DD a
salary of 5000 to recognize their relative time spent in operating the store.
Remaining profits and losses were divided 60:40 to AA and DD, respectively.
Income for 2007, the first year of operations, of 13000 was allocated 8000 to AA
and 4200 to DD. On January 1, 2008, the partnership agreement was change to
reflect the fact that DD could no longer devote any time to the store's operations.
The new agreement allows AA a salary of 18,000 and the remaining profits and
losses are divided equally. In 2008 an error was discovered such that the 2007
reported income was understated by 4,000. The partnership income of 25,000 for
2008 included the 4,000 related to year 2007.

In the reported net income of 25,000 for the year 2008, AA and DD would have:

AA DD AA DD
a. 21,900 3,100 c. 0 0
b. 17100 17,100 d. 12500 12,500

23. On January 1, 2008, DD and EE decided to form a partnership. At the end of the
year, tha partnership made a net income of 120,000. The capital accounts of the
partnership show the following transactions.

DD, Capital EE, Capital

Dr. Cr. Dr. Cr.

40,179 40,000 25,000
40,269 5,000
40,330 10,000
40,391 10,000
40,422 3,000
40,452 5,000 1,000

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 40,513 4,000 5,000

Assuming that an interest of 20% per annum is given on average capital and the
balance of the profits is allocated equally, the allocation of profits should be:

a. DD, 60,000; EE, 59,400 c. DD, 67,200; EE, 52,800

b. DD, 61,200; EE, 58,800 d. DD, 68,800; EE, 51,200

24. The partnership of DD and BB was formed and commenced operations on March
1, 2008, with DD contributing 30,000 cash and BB invested additional 10000 in
the partnership, DD made a capital withdrawal of 4,000 on May 2, 2008 but
reinvested the 4000 on the October 1, 2008. During 2008, DD withdrew 800 per
month and BB the managing partner, withdrew 1000 per month. These drawings
were charged to salary expense. A preclosing trial balance taken at December 31,
2008 is as follows:
Debit Credit
Cash 9,000
Receivable-net 15,000
Equipment-net 50,000
Other assets 19,000
Liabilities 17,000
DD, capital 30,000
BB, capital 40,000
Service revenue 50,000
supplies expense 17,000
Utilities expense 4,000
Salaries to partners 18,000
Other miscellaneous expense 5,000
Total 137,000 137,000

24. The share of DD and BB in the partnership net income assuming monthly salary
allowances 800 and 1000 for DD and BB, Respectively; interest allowance at a
12% annual rate on average capital balances; and remaining profits allocated
equally.

a. DD, 10,520; BB, 13480 c. DD, 10800; BB, 13200

b. DD, 12000; BB, 12000 d. DD, 10600; BB, 13400

25. AA and BB formed a partnership in 2008 and made the following investments and
capital withdrawals during the year:

AA BB

Investments Drawings Investment Drawing

40,238 30,000 20,000

40,330 10,000 10,000

40,391 20,000 2,000
40,513 5,000

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 The partnership's profit and loss agreement provides for a salary of which 30000
was paid to each parter for 2008. AA is to receive a bonus of 10% on net income
after salaries and bonus. The partners are also to receive interest of 8% on
average annual capital balances affected by both investments and drawings. Any
remaining profits are to be allocated equally among the partners. Assuming net
income of 60000 before salaries and bonus, determine how the income would be
allocated among the partners:

a. AA, 31138; BB, 28862 c. AA30633; BB, 29367

b. AA, 33537; BB, 26463 d. AA, 30684; BB, 29316

26. Partner A first contributed 50000 capital into an existing partnership on March 1,
2008. On June 1, 2008, the partner contributed another 20000. On September1,
2008, the partner withdrew 15000 from the partnership, withdrawals in excess of
10000 are charge to the partner's capital account. The annual weighted average
capital balance is

a. 62,000 c. 60,000
b. 51,667 d. 48,333

27. WW and RR share profits and losses equally, WW and RR receive salary
alloawances of 20,000 and 30,000, respectively, and both partners receive 10%
interst on their average capital balances. Average capital balances are calculated
at the beginning of each month regardless of when the capital contributions and
capital withdrawals were made and partners drawing s are not used in
determining the average capital balances. Total net income for 2008 is 120,000.

WW RR
January 1 capital balances 100,000 120,000
Yearly drawings (1,500 a month) 18,000 18,000
Permanent withdrawals of capital:
June 3 (12,000)
May 2 (15,000)
Additional investments of capital:
July 3 40,000
October 2 50,000

What is the weighted average capital for WW and RR respectively for 2008?

a. 110,667 and 119,583 c. 100,000 and 120,000

b. 105,333 and 126, 667 126,667 and 105,333

28. HH, MM and AA formed a partnership on January 1, 2008, and contributed

150,000, 200,000 and 250,000 respectively. Their articles of co-partnership
provide that the operating income be shared among the partners as follows: as
salary, 24,000 for HH, 18,000 for MM, and 12,000 for AA; inrested of 12% on the
average capital during 2008 of the the three partners; and the remainder is the
ratio of 2:4:4; respectively.

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 The operating income for the year ending December 31, 2008 amounted to
176000. HH contributed additional capital of 30,000 on July 1 and made a drawing
of 10,000 on October 1; MM contributed additional capital of 20,000 on August 1
and made a drawing of 10,000 on October 1 and AA made a drawing of 30,000 0n
November1.

The partner's capital balances on December 31, 2008 are

a. HH,179,680, MM, 229,360, and AA, 239,360

b. HH, 179,760; MM, 229,520; and AA, 239,520

c. HH, 189,680 MM, 239,360; and AA, 269,360

d. HH, 223,180; MM, 272,060; and AA, 280,760

29. Merlin a partner in the Camelot Partnership, has a 30% participation in the
partnership profits and losses. Merlins capital account has a net decrease of 1,200
during the calendar year 2008. During 2008, Merlin withdrew 2,600,000 (charge
against his capital accoun) and contributed property valued at 500,000 to the
partnership. What was the net income of the Camelot Partnership for year 2008?

a. 3,000,000 c. 7,000,000
b. 4,666,667 d. 11,000,000

30. On January 2, 2008, BB and PP formed a partnership. BB contributed capital of

175,000 and 25,000. They agreed to share profits and losses 80% and 20%
respectively. PP is the general manager and works in the partnership full time and
is given a salary of 5,000 a month;

The profit and loss statement of the partnership for the year ended December 31,
2008 is as follows:

Net sales 875,000

Cost of goods sold 700,000

Gross profits 175,000

Expenses (including the salary,interest and bonus) 143,000

Net Income 32,000

The amount of bonus to PP in 2008 amounted to:

a. 13,304 c. 18,000
b. 16,456 d. 20,700

31. On January 1,2008. A, B, C and D formed Bakya Trading Co., a partnership, with
capital contributions as follows A, 50,000; BB, 25,000; C, 25,000; and D, 20,000.
The partnership contract provided that each partner shall receive a 5% interest
on contributed capital, and that A and B shall receive salaries of 5,000 and 3,000

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 respectively. The contract also provided thaat C shall receive a minimun of 2,500
per annum, and D a minimum of 6,000 per annum, which is inclusive of amounts
representing interest and share of remaining profits. The balance of the profits
shall be distributed to A, B, C, and D in a 3:3:2:2 ratio.

What amount must be earned by the partnership, before any charge for interest
and salaries, so that A may receive an aggregate of 12,500 including interest,
salary and share of profits?

a.16,667 c. 30,667
b.30,000 d. 32,333

32. AA, BB, and CC are partners with average capital balances during 2008 of
472,500, 238,650 and 162,450 respectively. The partners receive 10% interest on
their average capital balances; after deducting salaries of 122,325 to AA and
82,625 to Cc, the residual profits or loss is divided equally. In 2008, the
partnership had a net loss of 125,624 before the interest and salaries to partners.
By what amount should AA's and CC's capital account change- increase
(decrease)
AA CC AA CC
a. 30,267 (40,448) c. (40,844) 31,235
b.29,476 17,536 d.28,358 32,456

33. The same information in # 32 , except the parnership had a loss of 125,624 after
the interest and salaries to partners, by what amount should BB's capital account
change-increase or decrease?

a. (115,443) c. (41,875
b,23,865 d. (18,010)

34. XX, YY and ZZ formed a partnership on January 1, 2008. Each contributed

120,000. Salaries were to be allocated as follows:

XX YY ZZ
30,000 30,000 45,000

Drawing were equal to salaries and be taken out evenly throughout the year.

With sufficient partnership net income, XX and YY could split a bonus equal to
25% of partnership net income after salaries and bonus (in no event could go
below zero). For the year, partnership net income was 120,000.

Compute the ending capital for each partner.

a. XX,155,100; YY, 155,100; ZZ, 169,800

b, XX, 126,000; YY, 126,000; ZZ, 124,500

c. XX, 125,100; YY, 125,100; ZZ, 124,800

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 d. XX, 125,500; YY, 125,500; ZZ, 124,000

35. CC, PP, and AA accountants agree to form a partnership and to share profits in
the ratio of 5:3:2. They also agreed that AA is to be allowed a salary of 28,000.
And that PP is to be guaranteed 21,000 as his share of the profits. During the first
year of operation, income from fess are 180,000 while expenses total 96,000.
What amount of net income should be credited to eact partners' capital account?

a. CC,28,000, PP, 16,800, AA, 11,200

b. CC, 25,000, PP, 21,000, AA, 38,000

c. CC, 25,000, PP,22,000, AA, 38 ,000

d,CC, 25,000, PP, 21,0000 AA, 39,000

36. Hunt, Rob, Turman, and Kelly own a publishing company that they operate as a
partnership. The partnership agreement includes the following:

Hunt receives a salary of 20,000 and a bonus of 3% of income after all bonuses

Rob receives a salary of 10,000 and a bonus of 2% of income after all bonuses

All partners are to receive 10% interest on their average capital balances.

The average capital balances are as follows:

Hunt 50,000
Rob 45,000
Turman 20,000
Kelly 47,000
Any remaining profits and loss are to be divided equally among the partners.

Determine how a profit of 105,000 would be allocated among the partners.

Hunt Rob Turman Kelly

answer: 41,450 29,950 15,450 18,150

37. RR and PP share profits after the provision of annual salary allowances of 14,400
and 13,200, respectively in the ratio of 6:4. However, if partnerships net income
is insufficient to provide for said allowances in full amoun, the net income shall be
divided equally between the partners. In 2008, the following errors were
discovered: Depreciation for 2008 is understated by 2,100 and the inventory on
December 31, 2008 is overstated by, 11,400. The partnership net income for
2008 was reported to be 19,500. The capital accounts of the partners should be
increased (decreased) by:
Answer: RR PP
(6,750) (6,750)

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 38. JJ and KK are partners sharing profits 60% and $0% respectively. The average
profits for the past two years are to be capitalized at 20% per year (for purpose
of admitting a new partner) in determining the aggregate capital of JJ and KK
after adjusting the profits for the following items omitted as follows:

Omission at the Year-End 2007 2008

Prepaid Expenses 1,600

Accrued Expenses 1,200
Deferred Income 1,400
Accrued Income 1,000

Other pertinent information are as follows:

2007 2008
Net income of partnership 14,400 13,600
Capital accounts, end of the year
JJ 45,400 54,000
KK 4,500 55,000

The aggregate capital of JJ and KK after capitalizing the average profits at 20%
per annum is:

Answer: 69,000

39. MM, NN and OO partners, share profits on a 5:3:2 ratio. On January 1, 2008, PP
admitted into the partnership with a 10% share in profits. The old partners
continue to participate in profits in their original ratio. For the year 2008, the net
income of the partnership was reported as 12,500. However, it was discovered
that the following items omitted in the firm books:

Unrecorded at year end 2007 2008

Prepaid Expense 800
Accrue Expense 600
Unearned Income 700
Accrued Income 500

(1)The new profit and loss ratio for N and (2) the share of partner OO in the 2008 net
income:

Answer:
(1) 27%; (2) 2,214

A, B and C are partners I an accounting firm. Their capital account balances at year-
end were A 90,000; B 110,000 and C P50,000. They share profits and losses on a
4:4:2 ratio, after the following special terms:

1. Partner C is to receive a bonus of 10% of net income after the bonus

2. Interest of 10% shall be paid on that portion of a partner's capital in excess of

100,000

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 3. Salaries of 10,000 and 12,000 shall be paid to partners A and C respectively.

Assuming a net income of 44,000 for the year, the total profit share of partner C
was:

Answer: 19,400

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