Chapter 3 – Partnership Operations

partners. The statement of changes in partners’ equity shoes the division of profit or loss to MULTIPLE CHOICE
the partners, the amount of withdrawals during the period, and the partners’ capital
balances at the end of the period.
MC 3-1 Banayo and his very close friend Buendia formed a partnership on January 1, 2014 with
Banayo contributing P160,000 cash and Buendia contributing equipment with a book
value of P64,000 and a fair value of P48,000, and inventory items with a book value of
GLOSSARY of ACCOUNTING TERMINOLOGIES P24,000 and a fair value of P32,000. During 2014, Buendia made additional investment
of P16,000 on April 1, and P16,000 on June 1. On September 1, withdrew P40,000.
Average capital – the amount of capital invested by a partner determined by the time during Banayo had no additional investment nor withdrawals during the year. The average
which such capital is actually used in the business. capital balance of Buendia at the end of the fiscal year 2014 is
a. P72,000
Bonus – an incentive normally given to the managing partner in recognition of managerial or b. P80,000
entrepreneurial skill or ability. It is usually a percentage of profit. c. P88,000
d. P96,000
Interest on capital – incentive given to partners to give recognition to the differences in
capital contributions and is computed in proportion to the period such capital was actually MC 3-2 Banas and Belda are partners who share profits equally and losses in a 2:1 ratio. If they
used. have beginning capital balances of P120,000 and P118,000, made no additional
investments nor withdrawals, and suffered an unprofitable year with loss of P48,000,
Salary allowances – compensation given to partners in proportion to the time devoted to the their capital balances will be:
business. Banas Belda
a. P 40,000 P 80,000
Statement of Changes in Partners’ Equity – a statement showing the division of partnership b. 88,000 102,000
profit or loss to the partners, additional investments made by partners, the amount of c. 120,000 118,000
withdrawals of individual partners, and the ending capital balances. d. 152,000 134,000

MC 3-3 Bernardo and Belo formed a partnership in the year 2014. The partnership agreement
provides for annual salary allowances of P110,000 for Bernardo and P90,000 for Belo.
The partners share profits equally and losses in a 60:40 ratio. The partnership had
profit of P180,000 for the year 2014 before any allowance to partners. What amount
should be credited to each partner’s capital account as a result of the distribution of the
partnership profit?
Bernardo Belo
e. P 98,000 P 82,000
f. 100,000 80,000
g. 96,000 84,000
h. 90,000 90,000

MC 3-4 Bunag, Belen, and Bustos are partners in an accounting firm. Their capital account
balances at year-end were P180,000, P220,000, and P100,000, respectively. They share
profits and losses on a 4:4:2 ratio, after considering the following items:
a. Bustos is to receive a bonus of 10% of profit after bonus.
b. Interest of 10% shall be paid on that portion of a partner’s capital in excess of
P200,000
c. Salaries of P20,000 and P24,000 shall be paid to partners Bunag and Bustos,
respectively.
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Assuming a profit of P220,000 for the year, the total profit share of Bustos is representing interest and their respective share in partnership profits. The balance of
a. P38,800 the profits shall be distributed among that partners in the ratio of 3:3:2:2.
b. P50,800
c. P54,800 What amount must be earned by the partnership in fiscal year, before any charge for
d. P74,800 interest and partners’ salaries, in order that Besa may receive an aggregate of P37.500
including interest, salary, and share of profits.
MC 3-5 Banta, Berba, and Borja formed a partnership on January 1, 2014. They had the a. P92,000
following initial investments: Banta – P200,000; Berba – P300,000; Borja – P450,000. b. P97,000
The partnership agreement states that profits and losses are to be shared equally by c. P50,000
the partners after consideration is made for the following: d. P90,000
a. Salary allowance of P120,000 for Banta, P96,000 for Berba and P72,000 for Borja.
b. Average partners’ capital balances during the year shall be allowed 10% interest. MC 3-9 Using the information in MC 3-8, the total profit share of Buan is
a. P 7,500
Additional information: b. P13,750
a. ON June 30, 2014, Banta invested an additional P120,000. c. P19,400
b. Borja withdrew P140,000 from the partnership on September 30, 2014. d. P37,500
c. Share on the remaining partnership profit was P10,000 for each partner.
MC 3-10 Using the information in MC 3-8, the total profit share of Baduel is
How much is the total interest on average capital balances of the partners? a. P13,000
a. P 95,000 b. P13,500
b. P 97,500 c. P18,000
c. P 107,500 d. P19,400
d. P115,250
MC 3-11 The partnership agreement between Banaria and Bertol stipulates that Banaria is to
MC 3-6 Using the information in MC 3-5, partnership profit at December 31, 2014 before receive a 20% bonus on profits before bonus with residual profit and loss to be
salaries, interest and partners’ share on the remainder is apportioned in the ratio of 2:3 respectively. Which partner has greater advantage when
a. P395,500 the partnership has a profit and when it incurs a loss.
b. P399,500 Profit Loss
c. P415,500 a. Bertol Banaria
d. P423,250 b. Banaria Bertol
c. Banaria Banaria
MC 3-7 Using the information in MC 3-5, the total partnership capital on December 31, 2014 is d. Bertol Bertol
a. P 950,000
b. P 970,000 MC 3-12 Bulan, Bustos, and Bucao formed a partnership o January 1, 2014 and contributed
c. P1,345,500 P150,000, P200,000, and P250,000, respectively. The Articles of Co-Partnership
d. P1,365,500 provide that the operating income be shared among the partners as follows: As salary:
Bulan – P24,000; Bustos P18,000; Bucao – P12,000; interst of 12% on the average
MC 3-8 On January 1, 2014, Besa, Bascom Buan, and Baduel formed the BF TRADING, a capital during 2014 of the three partners; the remainder will be divided in the ratio of
partnership with capital contributions as follows: Besa – P150,000; Basco – P75,000; 2:4:4, respectively.
Buan – P75,000; and Baduel – P60,000. The partnership agreement stipulates that each
partner shall receive a 5% interest on capital contributed and that Besa and Basco shall Additional information:
receive salaries (chargeable as expenses of the business) of P15,000 and P9,000, a. Operating income for the year ended December 31,2014 is P180,000.
respectively. The agreement further provides that Buan shall receive a minimum of b. Bulan contributed additional capital of P30,000 on July 1, and made drawing of
P7,500 per annum and Baduel a minimum of P18,000, which is inclusive of amounts P10,000 on October 1.

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c. Bustos contributed capital of P20,000 on August 1 and made withdrawal of

P10,000 on October 1.
d. Bucao made withdrawal of P30,000 on November 1.

The division of the P180,000 operating income is

Bulan Bustos Bucao
a. P53,760 P62,520 P59,720
b. P35,200 P70,400 P70,400
c. P53,980 P63,660 P62,360
d. P53,180 P62,060 P60,760

MC 3-13 Using the information in MC 3-12, the partners’ capital balances on December 31, 2014
are
Bulan Bustos Bucao
a. P223,980 P273,660 P282,360
b. P179,760 P229,520 P239,520
c. P189,860 P239,360 P269,360
d. P223,180 P272,060 P280,760

MC 3-14 Briones, Belen and Burgos are partners with average capital balances during 2014 of
P945,000, P447,300 and P324,700, respectively. The partners receive 10% interest on
their average capital balances, salaries of P224,650 to Briones and P165,250 to Burgos,
any residual profit or loss is divided equally.

In 2014, the partnership had a net loss of P251,248 before the interest and salaries to
partners.

What are the changes in the capital balances of Briones and Burgos?
Briones Burgos
a. P81,688 decrease P62,474 decrease
b. P56,716 increase P64,916 increase
c. P58,952 increase P35,070 increase
d. P60,534 increase P80,896 decrease

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