PROBLEM SOLVING:

1.Bernabe and Burgos formed a partnership on January 1,2011. The changes in their respective capital balances du

Bernabe, capital Burgos, capital

10/31 60,000 1/1 360,000 6/30 80,000 1/1 440,000
5/31 100,000 10/31 140,000

Instructions: Prepare the entry to record the allocation of the partnership profit to individual capital accounts unde

a.Each partner receives a 8% interest on beginning-of-the-year capital balances and the remainder is divided betwe

Bernabe Burgos Total

Interest : 8% 28,800 35,200 64,000

Remainder 530,000 106,000 636,000

558,800 141,200 700,000

b. Bernabe and Burgos are given annual salaries of P140,000 and P260,000, respectively, 12% interest on the endd-

Bernabe Burgos Total

Salaries 140,000 260,000 400,000
Interest : 12% 48,000 60,000 108,000

Remainder 48,000 144,000 192,000

25% and 75% 236,000 464,000 700,000

BERNAL
Jan 1 - May 31 360,000 x 5 = 1,800,000
June 1 - Oct 31 460,000 x 5 = 2,300,000
Nov 1 - Dec 31 400,000 x 2 = 800,000
4,900,000 / 12 = 408,333

c.Bernabe and Burgos are given salaries of P90,000 and P170,000, respectively, 12% interest on average capital bala

Bernabe Burgos Total

Salaries 90,000 170,000 260,000
Interest : 12% 49,000 50,800 99,800

Remainder 113,400 226,800 340,200

1/3 : 2/3 252,400 447,600 700,000
d. Bernabe and Burgos are given salaries of P100,000 and P200,000, respectively, 10% interest on average capital b

Bernabe Burgos Total

Salaries 100,000 200,000 300,000
Interest : 10% 40,833 42,333 83,166

Remainder 158,417 158,417 316,834

divide equally 299,250 400,750 700,000

BERNAL
Jan 1 - May 31 360,000 x 5 = 1,800,000
June 1 - Oct 31 460,000 x 5 = 2,300,000
Nov 1 - Dec 31 400,000 x 2 = 800,000
4,900,000 / 12 = 408,333

e. Each partner receives 8% interest on beginning-of-the-year capital balances and a salary of P100,000, Bernabe re
and the remainder is divided in the ratio of 2:3

Bernabe Burgos Total

Interest: 8% 28,800 35,200 64,000
Salaries 100,000 100,000 200,000
Bonus (700k-64k-200k x .10) 43,600 43,600

Remainder 156,960 235,440 392,400

ratio of 2:3 329,360 370,640 700,000

2.The capital accounts of Santos and Abad show the facts presented below for the fiscal year ended December 31,

a. In the ratio of investments at the beginning of the fiscal period

260,000 / 425,000 = 0.61 x 238,000

165,000 / 425,000 = 0.38 x 238,000

b. In the ratio of average capitals. Investments and withdrawals are to be considered as made at the beginning of th
at the beginning of the following month if made after the middle of the month.

SANTOS 312,500 / 500,000 X 238,000

ABAD 187,500 / 500,000 X 238,000

312,500 + 187,500 = 500,000

c. Interest of 6% on average capitals, salaries to Santos and Abad of P150,000 and P100,000 respectively, and any b
SANTOS
Jan 1 -March 30 260,000 x 3/12 = 65,000
March 30 - May 10 290,000 x 1/12 = 24,167
May 10 - July 25 360,000 x 3/12 = 90,000
July 25 - Dec 31 320,000 x 5/12 133,333
312,500

Santos Abad Total

Interest : 6% 18,750 11,250 30,000
Salaries 150,000 100,000 250,000

Remainder -21,000 -21,000 -42,000

any balance, divided 147,750 90,250 238,000
equally

312,500 x 6% = 18,750
187,500 x 6% = 11,250

d. Allowance to Santos of a bonus of 25% of the net profit after bonus, interest of 6% to be allowed on the excess o

Santos Abad Total

Bonus 47,600 47,600
Interest: 6% 7,500 7,500

Remainder 109,740 73,160 182,900

164,840 73,160 238,000

B = 25% (238,000 - B) 312,500 - 187,500 = 125,000 X 6% = 7,500

B = 59,500 - 25% B
B + .25B= 59,500
1.25B = 59,500
B = 59,500 / 1.25
B= 47,600

e. Salaries of P15,000 and P10,000 a month to Santos and Abad, respectively, provided annual earnings are sufficien

Santos 15,000 x 12 = 180,000

Abad 10,000 x 12 = 120,000
300,000

180,000 / 300,000 x 238,000 = 142,800

120,000 / 300,000 x 238,000 = 95,200
238,000
respective capital balances during the year ended December 31,2011 are presented on below. During the year, the partnership earned a p

1/1 440,000
10/31 140,000

dividual capital accounts under each of the following assumptions:

he remainder is divided between Bernabe and Burgos in the ratio of 5:1, respectively

Income Summary 700,000

Bernabe, Capital 558,800
Burgos, Capital 141,200

ely, 12% interest on the endd-of-year capital balances, and the remainder is divided 25%,75%

Income Summary 700,000

Bernabe, Capital 236,000
Burgos, Capital 464,000

BURGOS
Jan 1 - Jun 31 440,000 x 6 = 2,640,000
July 1 - Oct 31 360,000 x 4 = 1,440,000
Nov 1 - Dec 31 500,000 x 2 = 1,000,000
5,080,000 / 12 = 423,333

nterest on average capital balances and the remainder divided in the ratio of 1/3:2/3

Income Summary 700,000

Bernabe, Capital 252,400
Burgos, Capital 447,600
% interest on average capital balances, and the remainder divided equally.

Income Summary 700,000

Bernabe, Capital 299,250
Burgos, Capital 400,750

BURGOS
Jan 1 - Jun 31 440,000 x 6 = 2,640,000
July 1 - Oct 31 360,000 x 4 = 1,440,000
Nov 1 - Dec 31 500,000 x 2 = 1,000,000
5,080,000 / 12 = 423,333

salary of P100,000, Bernabe receives a bonus of 10% oof profit after deducting interest and salaries

Income Summary 700,000

Bernabe, Capital 329,360
Burgos, Capital 370,640

cal year ended December 31, The Income Summary account shows a credit balance of P238,OO0 on December 31

Income Summary 238,000

Santos, Capital 145,600
Abad, Capital 92,400

as made at the beginning of the month. if made before the middle of the month and are to be considered as made

Income Summary 238,000

Santos, Capital 148,750
Abad, Capital 89,250

00,000 respectively, and any balance divided equally. Investments and withdrawals are to be considered as in assumption (2)
 ABAD
Jan 1 - May 18 165,000 x 5/12 = 68,750
May 18 - Aug 24 215,000 x 3/12 = 53,750
Aug 24 -Dec 31 195,000 x 4/12 = 65,000
187,500

Income Summary 238,000

Santos, Capital 147,750
Abad, Capital 90,250

to be allowed on the excess of the average investment of one partner over that of the other, and any balance divided in the ratio of 3:2 to

Income Summary 238,000

Santos, Capital 164,840
Abad, Capital 73,160

ed annual earnings are sufficient to cover the allowance; if earnings are insufficient, the profit shall be distributed in the salary ratio; if ope

Income Summary 238,000

Santos, Capital 142,800
Abad, Capital 95,200
e partnership earned a profit of P700,000
ded in the ratio of 3:2 to Santos and Abad, respectively. Investments and withdrawals are to be considered as in assumption (2)

n the salary ratio; if operations result in a loss, it shall be distributed equally.

as in assumption (2)