1.1.

2 PARTNERSHIP OPERATION (M-7 S-32) = 39

1. D, S, and T have capital balances of P30,000, P20,000, and P40,000, respectively. Their P/L ratio is
10% interest on capital balances; S is entitled to a salary of P12,000; T is guaranteed a minimum
share of P24,000 and remainder is divided 30:30:40.
The minimum profit to give an aggregate of P20,000 to S is:

a. P60,000 b. P53,000 c. P56,000 d. P49,000

D S T Total
Salary 12,000 P12,000
Interest 3,000 2,000 4,000 9,000
Balance 3:3:4 6,000 6,000 8,000 20,000
Additional income 12,000 12,000
P9,000 P20,000 P24,000 P53,000 B

2. Roel and Jekell, partners, divide profits and losses on the basis of average capitals. Capital accounts
for the year ended December 31, 2016, are shown below. The net profit for 2016 is P270,000.
(Changes in capitals during the first half of a month are regarded as effective as of the beginning of
the month; changes during the second half of a month are regarded as effective as of the beginning
of the following month.)
Roel, Capital Jekell, Capital
Debit Credit Debit Credit
January 1 P600,000 P660,000
March 9 P100,000
April 14 300,000
July 1 200,000
September 4 P80,000
September 22 200,000
October 26 150,000

The share of Roel on the 2016 profit is:

a. P114,500 b. P154,500 c. P115,500 d. P125,260

Weighted average capital of Roel:

January 1 600,000 x 12/12 P600,000
March 9 (100,000) x 10/12 ( 83,333)
July 1 200,000 x 6/12 100,000
September 22 200,000 x 3/12 50,000
October 26 (150,000) x 2/12 ( 25,000) P641,667

Weighted average capital of Jekell:

January 1 660,000 x 12/12 P660,000
April 14 300,000 x 9/12 225,000
September 4 (80,000) x 4/12 ( 26.667) P858,333
Share of Roel on the net income of P270,000:
641,667/1,500,000 x 270,000 = P115,500 C

1
3. L, M, and N are partners with capital balances on January 1, 2016 of P1,200,000, P480,000, and
P240,000, respectively. They agreed to share profits and losses as follows:
a. Salary allowances of L, P192,000; M, P240,000, and N, P240,000.
b. 6% interest allowed on beginning of the year’s capital balances.
c. The managing partner, L to be entitled to a 20% bonus after allowing as expenses partners’
salaries , interest and bonus; and
d. Profits after partners’ salaries, interest, and bonus to be divided equally.

For the year 2016, the partnership reported profit before interest, salaries and bonus of P1,176,000.
For the year, the partners’ drawings were L, P408,000, M, P80,000 and N, P424,000. Each partner’s
share in the profits after salaries, interest and bonus was

a. P 108,000 b. P 129,600 c. P 392,000 d. P 103,680

Profit before interest, salaries and bonus P1,176,000

Less: Salaries (192,000 + 240,000 + 240,000) ( 672,000)
Interest of 6% on beginning capital (6% x 1,920,000) ( 115,200)
Bonus to L (1,176,000 – 787,200) x 20%/120% ( 64,800) .2x
Net income after interest, salaries and bonus P 324,000 x
Divided equally  3
Share of each partner P 108,000 A

Algebra: 1176K -672k – 115.2K – 0.2X = X

388.8K = 0.20x +X (or 1.2x)
X = 388.8 K / 1.2
X = 324K
Bonus = .2 x 324
= 64.8 K

4. Eddy and Freddy operate The Gourmet Restaurant as a partnership. Their partnership agreement has
the following provisions for sharing profits and losses:
A. Income is distributed only as far as it is available.
B. Available income is to be distributed in the following sequence:
1. Eddy, who is the chef, gets a salary of P50,000 a year; Freddy, who is still learning, gets
a salary of P20,000.
2. Interest is imputed on the average capital balances at 15 percent.
3. Any remaining profits and losses are to be shared equally.

The average capital balances during the year were P40,000 for Eddy and P100,000 for Freddy. If the
partnership income for the year is P35,000, it should be distributed to the partners as follows:
a. Eddy P16,000; Freddy P19,000
b. Eddy P17,500; Freddy P17,500
c. Eddy P25,000; Freddy P10,000
d. Eddy P28,000; Freddy P7,000

Inasmuch as the net income of P35,000 is less than the total salaries of P70,000, then the net income
will only be distributed based on salary ratio of 5:2
Eddy = 5/7 x 35,000 = P25,000; Freddy = 2/7 x 35,000 = P10,000 C

2
5. O and M formed the KERN Partnership several years ago. Capital account balances on December 31,
2014, after closing were as follows:
O P500,000
M 280,000

The partnership agreement provides O with an annual salary of P10,000 plus a bonus of 5% of
partnership net income for managing the business. M is provided an annual salary of P15,000 with
no bonus. The remainder is shared evenly. Partnership net income for 2014 was P30,000. O and M
each invested additional P5,000 during the year to finance a special purchase. Year- end drawing
account balances were P15,000 for O, and P10,000 for M. The capital balances of O and M on
January 1, 2014 were:
c. P505,000 and P290,000.
a. P503,250 and P291,750. d. P480,000 and P310,000.
b. P496,750 and P268,250.

O M
500 280

- 10 - 15 25
- 1.5 1.5
- 1.75 - 1.75 3.5
- 5 - 5
15 10
496.75 268.25

6. A, B and C are partners sharing profit on a 7:2:1 ratio, respectively. On January 1, 2016, Lexus was
admitted into the partnership with a 15% share in profits. The old partners continue to participate in
the profits in their original ratios. For the year 2016, the partnership showed profits of P15,000.
However, it was discovered that the following items were omitted from the firm’s books:

Unrecorded at Year- end 2015 2016

Accrued expense P1,050
Accrued income 875
Prepaid expense P1,400
Unearned income 1,225

The share of B in the 2016 profits should be:

a. P 2,197.50
b. P 2,490.50
c. P 2,637.00
d. P 3,149.75

NI - Unadjusted 15,000

3
 AE (1,050)
AI 875
PE (1,400)
1,225
Adjusted NI 14,650

Total –lexus which is 15%

14,650
x 85% x2/10 2,490.50 B

7. Partners R and S share profits 3:1 after annual salary allowances of P40,000 and P60,000,
respectively; however, if profits are not adequate to meet the salary allowances, the entire profit is to
be divided in the salary ratio. Profits of P90,000 were reported for the year 2016. In 2014, it is
ascertained that in calculating net income for the year ended December 31, 2016, depreciation was
overstate by P36,000 and ending inventory was overstated by P8,000.

The adjustment to the capital of R and S amounted to

a. P29,500 and P14,500 c. P17,500 and P10,500
b. P36,000 and P54,000 d. P53,500 and P64,500

4NI 90,000
Over statement in Dep Exp 36,000
Understated 8,000

NI 134,000

To demonstrate the effect:

Adjusting Entry in Periodic Method.

1. Inventory end xxx

Cost of Sales xxx

2. Cost of Sales xxx

Inventory Beg xxx

3. Cost of Sales xxx

Purchases xxx

Sales 200,000 200,000

Less : Cost of Sales
Invty beg 100,000 92,000
Add: Purchases 40,000 40,000
Total 140,000 132,000
Invty end 30,000 110,000 30,000 102,000
Net Income 90,000 98,000

R S
SAL 40,000 60,000 100,000
Remainder 25,500 8,500 34,000
Should be 65,500 68,500 134,000

4
 Prior (36,00) (54,000) (90,000)
29,500 A 14,500 44,000

SITUATIONAL QUESTIONS

A. Aya and Rhea formed the A & R partnership several years ago. Capital account balances on January
1, 2016 were: Aya, P993,500; and Rhea, P536,500.

The partnership agreement provides Aya with an annual salary of P20,000 plus a bonus of 5% of
partnership net income for managing the business. Rhea is provided an annual salary of P30,000 with
no bonus. The remainder is shared evenly. Partnership net income for 2016 was P60,000. Rhea and
Aya each invested an additional P10,000 during the year to finance a special purchase. Year-end
drawing account balances were P30,000 for Aya and P20,000 for Rhea.

1. What should be the net income of the partnership so that Aya and Rhea will have the same
amount of share.

a. P200,000 b. Any amount c. 100,000 d. P 0

2. In partnership, the factor which is least considered in establishing a just and fair profit and loss
sharing agreement:

a. Longevity of a partner in the partnership.

b. Salaries to partners proportionate to time devoted to the organization.
c. Interest on capital contributions is allowed to each partner to give recognition to the
differences in capital contributed to the partnership.
d. Bonus is allowed to partners when the partnership realizes profits in order to give recognition
to managerial skills.

3. Aya’s capital balances as of December 31, 2016 should be:

a. P1,000,000 b. P560,000 c. P998,750 d. P561,250

4. Rhea’s capital balances as of December 31, 2016 should be:

a. P560,000 b. P1,000,000 c. P998,750 d. P561,250

Aya Rhea Total

Capital January 1, 2016 P 993,500 P536,500 P1,530,000
Additional investment 10,000 10,000 20,000
Drawings during the year ( 30,000) ( 20,000) ( 50,000)
Net income: 60,000
Salaries 20,000 30,000 50,000
Bonus (5% x 60,000) 3,000 3,000
Balance equally 3,500 3,500 7,000
Capital December 31, 2016 P1,000,000 P560,000 P1,560,000

5
B. G and H formed a partnership on January 2, 2016, and agreed to share income 90%, 10%,
respectively. G contributed a capital of P25,000. H contributed no capital but has a specialized
expertise and manages the firm full-time. There were no withdrawals during the year. The
partnership agreement provides for the following:

a. Capital accounts are to be credited annually with interest at 5% of

beginning capital.
b. H is to be paid a salary of P1,000 a month.
c. H is to receive a bonus of 20% of income calculated before deducting his bonus, his
salary, and interest on both capital accounts.
d. Bonus, interest, and H’s salary are to be considered partnership
expenses.

The partnership’s 2016 income statement follows:

Revenues P 96,450
Expenses (including salary, interest and bonus) 49,700
Net income P 46,750

1. In forming a partnership the articles of partnership shall be filed and the certificate of registration
shall be issued by the:

a. Securities and Exchange Commission b. Department of Trade and Industry

b. Bureau of Internal Revenue c. Board of Accountancy

2. How much is the total share of G on the 2016 partnership net income?

a. P43,325 b. P28,650 c. P32,388 d. P28,338

3. How much is the total share of H on the 2016 partnership net income?

a. P31,675 b. P28,650 c. P32,388 d. P28,338

4. The amount of net income which each partner will have equal percentage share in the profit of
the partnership shall be:

a. P25,568.18 b. P 46,750 c. P50,000.00 d. none of the choices

Correct net income:

Reported net income P46,750
Add back:
Interest on beginning capital (5% x 25,000x2) 2,500
Salaries (1,000 x 12) 12,000
Bonus (46,750 + 2500 + 12,000)/80% x 20% 15,000
P75,000
G H Total
Interest on beginning capital P 1,250
Salaries P12,000 12,000
Bonus (75,000 x 20%) 15,000 15,000
Balance 9:1 42,075 4,675 46,750

6
 P43,325 P31,675 P75,000

C. Dianne and David created a partnership to own and operate a health food store. The partnership
agreement provided that Dianne receive a salary of P20,000 and David a salary of P10,000 to
recognize their relative time spent in operating the store. Remaining profits and losses were divided
60:40 to Dianne and David, respectively. Income for 2015, the first year of operations, of P26,000
was allocated P17,600 to Dianne and P8,400 to David.

On January 1, 2016 the partnership agreement was changed to reflect the fact that David could no
longer devote any time to the store’s operations. The new agreement allows Dianne a salary of
P36,000 and the remaining profits and losses are divided equally. In 2016 an error was discovered
such that the 2015 reported income was understated by P8,000. The partnership income of P50,000
for 2016 included this P8,000 related to 2015.

1. By what amount should Dianne’s capital change in 2016?

a. P 43,800 b. P46,200 c. P39,000 d. P43,000

2. By what amount should David’s capital change in 2016?

a. P 6,200 b. P46,200 c. P43,800 d. P43,000

3. In the above changes in the partnership agreement, the same shall result to:

a. Dissolution of the Partnership

b. Termination of the Partnership
c. Winding up of the Partnership
d. None of the Choices

4. Select the correct statement about partnership:

a. A partnership is defined as “a contract whereby two or more persons bind themselves to

contribute money, property, or industry to a common fund, with the intention of dividing the
profits among themselves”.
b. A partnership is defined as “a contract whereby two or more person binds into agreements to
contribute funds and properties or industries with the intentions of dividing the profits
between themselves.
c. A partnership is defined as “ a contracts whereby two or more persons binds themselves to
contribute money, property, or industry into a common funds with the intentions of dividing
profits between themselves.
d. A partnership is defined as “ contracts whereby two or more persons are bound themselves
to contribute money, property, or industry into a common funds with the intentions of
dividing profits between themselves.

Dianne David Total

Correct distribution of income 2015
Salaries P20,000 P10,000 P30,000
Balance 60:40 2,400 1,600 4,000
P22,400 P11,600 P34,000
Reported 2015 distribution 17,600 8,400 26,000
Adjustment P 4,800 P 3,200 P 8,000

7
 Net income of 2016 P42,000
Salaries 36,000 36,000
Balance equally 3,000 3,000 6,000
Change in the capital P43,800 P 6,200 P50,000

D. X, Y and Z formed a partnership on November 10, 2015, known as XYZ Trading. X and Y each
contributed P60,000 and P120,000 cash respectively. Z contribution consisted of 100 shares of A
Company stock which had cost him P40,000. On November 10, 2015, the stock had a market value of
P1,800 per share. The net profit from operations, after adjustment is P300,000 as of December 31,
2016, and after deducting/considering the following information:

a. Personal consumption of partners and families is P4,000 for each partner per month.
b. Each of the partners devote full time to the business an withdrew P5,000 per
week in 2016.

1. Ignoring result of operation for the prior year, the ending capital account of X

a. (P44,000)
b. (P164,000)
c. P186,900
d. P54,000

2. Ignoring result of operation for the prior year, the

ending capital account of y is:

a. P220,000
b. P164,000
c. P186,900
d. P54,000

3. Ignoring result of operation for the prior year, the

ending capital account of Z is:

a. P484,000
b. P660,000
c. P230,000
d. P255,000

4. The corrected net income of the business:

a. P1,224,000
b. P 300,000
c. P780,000
d. P924,000

Correct net income of the business:

Net income reported P300,000
Add: Personal consumption of partners (4,000 x 3 x 12) 144,000
Drawings (5,000 x 3 x 52 wks) 780,000

8
 P1,224,000
X Y Z Total
Beginning capital P 60,000 P 120,000 P 180,000 P360,000
Personal consumption ( 48,000) ( 48,000) ( 48,000) ( 144,000)
Drawings (260,000) (260,000) (260,000) ( 780,000)
Net income capital ratio 204,000 408,000 612,000 1,224,000
Capital ending (P44,000) P220,000 P 484,000 P660,000

E. Rubi, Gwen, and Celine have been partners throughout 2016. Their average balances and their
balances at the end of the year before closing the nominal accounts are as follows:

Partner Average Balances Balances, 12/31/16

Rubi P97,500 P70,000
Gwen 7,300 11,800
Celine 4,250 1,700 (debit balance)

The income for 2016 is P103,500 before charging partners’ salary allowances and before payment of
interest on average balances at the agreed rate of 4% per annum. Annual salary allocations are
P12,500 to Rubi, P8,750 to Gwen, and P6,250 to Celine. The balance of the profits is to be allocated
at the rate of 60% to Rubi, 10% to Gwen, and 30% to Celine.

It is intended to distribute cash to the partners so that, after credits and allocations have been made
as indicated in the preceding paragraph, the balances in the partners’ accounts will be proportionate
to their residual profit-sharing ratios. None of the partners is to invest additional cash, but they wish
to distribute the lowest possible amount of cash.

1. How much is the capital balance of Rubi;

a. P52,422;
b. P129,383;
c. P110,160;
d. P168,036;

2. How much is the capital balance of Gwen and Celine, respectively.

a. P8,737 and P26,211

b. P28,006 and P26,211
c. P18,360 and P55,080
d. P28,006 and P84,018

3. Partnership capital and drawings accounts are similar to the corporate:

a. Paid in Capital, retained earnings, and dividends account

b. Retained earnings account
c. Paid in capital and retained earnings account
d. Preferred and Common stocks account

4. If one of the partners in the partnership sharing profit based on capital ratio
will eventually have a negative balance of his capital after distribution of
loss, the said partner should contribute to restore a positive balance of his
capital. Following are the reasons except:

9
 a. At all times, all partners should have capital contribution
b. Succeeding distribution might be distorted as he may profit should the
company incur losses in the subsequent year as compared to other
partners with positive capital balances.
c. A negative balance of a partner’s capital is effectively a loan from the
partnership which must be paid by the partner.
d. In business, there is no such thing as negative capital.

Rubi Gwen Celine Total

Net income distribution:
Salaries P 12,500 P 8,750 P 6,250 P 27,500
Interest of 4% 3,900 292 170 4,362
Balance 60:10:30 42,983 7,164 21,491 71,638
P 59,383 P16,206 P27,911 P103,500
Balances, 12/31/16 70,000 11,800 ( 1,700) 80,100
Ending capital adjusted P129,383 P28,006 P26,211 P183,600

The partners wish to distribute the lowest amount of cash, therefore the agreed capital must be lower
than P183,600. The required capital can be determined as follows:
Rubi capital = 129,383/60% = P215,638 cannot be.
Gwen capital = 28,006/10% = P280,060 cannot be.
Celine capital = 26,211/30% = P87,370 can be.
Therefore, the required capital balances must be:
Rubi = P87,370 x 60% = P52,422
Gwen = P87,370 x 10% = P8,737
Celine = P87,370 x 30% = P 26,211 A

F. Partners E, F and G have capital balances in a partnership of P70,000, P30,000, and P900,000,
respectively. The losses for the year are P120,000.

1. What will be the capital balance of F if the three partners share profits and losses at 2:2:6 ratio?
a. P6,000 credit balance. c. P24,000 debit balance.
b. P10,000 debit balance. d. P40,000 debit balance.

E F G
70 30 900 1,000
(24) (24) (72) (120,000)
46 6,000 A

2. What will F’s capital be if E gets a P140,000 salary, F gets a P50,000 salary, and G gets a 10%
interest on her beginning capital balance, with the remaining being divided at a 1:1:2 ratio?
a. . P20,000 debit balance c. P10,000 debit balance.
b. Zero d. P70,000 debit balance.

E F G Total

Salary 140,000 50,000 90,000

Interest 90,000 90,000
(100,000) (100,000) (200,000) (400,000)

10
 NI 40,000 (50,000) (110,000) (120,000)
40,000 30,000 900,000 10,000
110,000 (20,000 ) B 790,000 880,000

3. When a new partner is admitted to a partnership an original partner’s capital account may be
adjusted for:

a. His or her share of previously unrecorded intangible assets traceable to the original partners
b. A proportionate share of the incoming partner’s investment
c. His or her share of previously unrecorded intangible assets traceable to the incoming partner
d. None of the choices.

4. If a new partner acquires a partnership interest directly from the partner rather than from the
partnership itself;

a. The existing partner’s capital account should be reduced and the new partner’s account
increased
b. No entry is required
c. The partnership assets should be revalued
d. The partnership has undergone a quasi-reorganization

G. Sin and Vidal were partners. Shortly before the close of 2016 their bookkeeper left suddenly, and
they disagreed about the manner of distributing 2016’s net loss from operations, which amounted to
P3,380 before consideration of interest (the partners agree that the rate is 5%), salaries or drawings.
They ask you to arbitrate the matter. You believed that the best evidence of their understanding is
the manner in which the distribution of earnings was made in earlier years. The partners agree that
the division of the 2015 net income of P48,990 was made in accordance with their understanding of
their profit-sharing agreement. The partners’ capital accounts for the years 2015 and 2016 are shown
below:

Sin, capital
----------------------------------------------------------------------------------------------------------------------
Dec. 31, 2015 Salary P 12,000 Jan. 1, 2015 Balance P 120,000
31, 2015 Drawings 3,930 July 1, 2015 Investment 4,800
Balance 130,000 Dec. 31, 2015 Net income 21,130
P 145,930 P145,930
Jan. 1, 2016 Balance 130,000
Sept. 1, 2016 Investment 3,600
Vidal, capital
----------------------------------------------------------------------------------------------------------------------
May 1, 2015 Excess withdrawal P 6,000 Jan. 1, 2015 Balance P 180,000
Dec. 31, 2015 Salary 16,000 Nov. 1, 2015 Investment 6,000
31, 2015 Drawings 2,660 Dec. 31, 2015 Net income 27,860
Balance 189,200 __
P213,860 P213,860
Jan. 1, 2016 Balance P189,200

1. The weighted average capital of Sin in 2015 is:

a. P 122,400 b. P120,000 c. 130,000. d. 177,000

2. The weighted average capital of Vidal in 2015 is:

a. P177,000 b. P180.000 d. P186,000 e. 185,000

11
 3. The weighted average capital of Sin and Vidal in 2016 respectively are:

a. P131,200; P189,200
b. P129,800; P180,200
c. P130,000; P189,200
d. P177,000; P122,400

4. The distribution of 2016 net loss are:

a. Sin, (P5,140); Vidal, P1,760 c. Sin, (P1,458); Vidal, (P1,922)

b. Sin, (P1,649); Vidal, (P1,731) d. Sin, (P1,352); Vidal, (P2,028)

Distribution of 2015 net income:

. Sin Vidal Total
Salaries P12,000 P16,000 P28,000
Interest of 5% on average capital
5% x 122,400 6,120
5% x 177,000 8,850 16,970
Balance equally 3,010 3,010 6,020
P21,130 P27,860 P48,990

Weighted average capital of Sin 2015:

January 1 balance 120,000 x 12/2015 P120,000
July 1 investment 4,800 x 6/2015 2,400 P122,400
Weighted average capital of Vidal 2015:
January 1 balance 180,000 x 12/2015 P180,000
May 1 excess withdrawal 6,000 x 8/2015 ( 4,000)
November 1 investment 6,000 x 2/2015 1,000 P177,000

Distribution of 2016 net loss:

Sin Vidal Total
Salaries P12,000 P16,000 P28,000
Interest of 5% on average capital
5% x 131,200 6,560
5% x 189,200 9,460 16,020
Balance equally ( 23,700) ( 23,700) ( 47,400)
(P 5,140) P 1,760 (P 3,380) C

Weighted average capital of Sin 2016:

January 1 balance 130,000 x 12/2016 P130,000
September 1 investment 3,600 x 4/2016 1,200 131,200
Weighted average capital of Vidal 2016:
January 1 balance 189,200 x 12/2016 P189,200

H. X, Y and Z have been partners throughout the year 2014. Their average balances for the year and
their balances at the end of the year before closing the nominal accounts are as follows:
Balances
Average Balances Dec. 31, 2014
X (Cr.) P900,000 (Cr.) P600,000
Y (Cr.) 30,000 (Dr.) 10,000
Z (Cr.) 70,000 (Cr.) 100,000

12
The profit for 2014 is P750,000 before charging partners’ drawing allowances and before interest on
average balances at the agreed rate of 4% per annum. X is entitled to a drawing account credit of
P100,000, Y of P70,000, and Z of P50,000 per annum. The balance of the profit is to be distributed at
the rate of 60% to X, 30% to Y, and 10% to Z.

The partners agreed that, after credits and distribution as indicated in the preceding paragraph, it is
intended to adjust the capital accounts of partners by investing the highest amount of cash, so that,
the balances in the partners’ accounts will be proportionate to their profit-sharing ratios. None of the
partners will withdrew cash from the partnership.

1. What is the total capital of the partnership after distributing the net income for 2014?
a. P 1,440,000. b. P 690,000 c. P1,220,000 d. P1,030,000

2. Based on the partnership data, which of the partners have the biggest ending capital balance?

a. X b. Y c. Z d. all of the choices

3. If partners’ intention is to contribute cash into the partnership, then the agreed capital must be
greater than the partnership total capital balance after distributing the net income for 2014. Which
of the partner’s capital shall be the basis of computing the agreed capital in order to give the highest
amount of cash contribution?
a. Z b. Y c. X d. all of the choices

4. What amount of investment must be made by each partners.

a. X, P180,800, Y, P397,200; Z, none

b. X, none; Y, P578,000 and Z, none
c. X, none; Y, P296,800 and Z, none
d. X, none; Y, P296,800 and Z, (P30,133)

Distribution of net income of 2014:

X Y Z Total
Drawing account credit or salary
Allowance P 100,000 P 70,000 P 50,000 P 220,000
Interest on average capital
4% x 900,000 36,000
4% x 30,000 1,200
4% x 70,000 2,800 40,000
Balance 60:30:10 294,000 147,000 49,000 490,000
P 430,000 P218,200 P101,800 P 750,000
Beginning capital 600,000 ( 10,000) 100,000 690,000
Capital end, after net income P1,030,000 P208,200 P201,800 P1,440,000

If partners’ intention is to contribute cash into the partnership, then the agreed capital must be greater
than P1,440,000. The agreed capital can be determined as follows:
X, capital = 1,030,000/60% = P1,716,667 can be.

13
 Y, capital = 208,200/30% = P694,000 cannot be.
Z, capital = 201,800/10% = P2,018,000 can be.

Of the two choices X or Z, the agreed capital must be that of Z’s basis, because it gives the highest
amount of cash to be invested. Therefore:
X Y Z Total
Required capital:
2,018,000 x 60% P1,210,800
2,018,000 x 30% P605,400
2,018,000 x 10% P201,800 P2,018,000
Actual (adjusted) capital 1,030,000 208,200 201,800 1,440,000
Required additional investments P 180,800 P397,200 P - P 578,000 B

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