20
Chapter 2
CHAPTER 2 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 2-1: d Jordan
Pippen
Total
Annual salary Balance, equally
P120,000 ( 10,000)
P80,000 P200,000 ( 10,000) ( 20,000)
Total
P110,000
P 70,000
P180,000
JJ
KK
LL
Total
Bonus (.20 X P90,000) Interest JJ (.15 X P100,000) KK (.15 X P200,000) LL (.15 X P300,000) Balance, equally
P18,000
–
–
P 18,000
P15,000
–
– ) – )
Total profit share
P27,000
2-2: a
P 30,000 ( 6,000)
P45,000) ( 6,000)
90,000 ( 18,000)
P 24,000
P39,000
P 90,000
Allan
Michael
Total
( 6,000)
2-3: a 2-4: a
Interest Allan - .10 X (P40,000 + 60,000 /2) Michael - .10 X (P60,000 + 70,000/2) Balance, equally
P 5,000 _14,000
Total
) P 6,500) P 11,500 _14,000 __28,000
P 19,000
P20,500
P 28,000
Greg
Henry
Total
P 6,000
P 4,000 20,000 ( 35,000)
P 22,000 50,000 (105,000)
2-5: a Fred
Interest (.10 of average capital) Salaries Balance, equally
P12,000 30,000 ( 35,000)
( 35,000)
Total
P 7,000
( P29,000)
2-6: b
Average Capital Date
Capital Balance
Months Unchanged
January 1 July 1 August 1
140,000 180,000 165,000
6 1 5 12
Peso Months
P 840,000 180,000 __825,000 P1,845,000
Aver Averag agee capi capittal - P1,8 P1,845 45,0 ,000 00/1 /12 2
=
P153 P153,7 ,750 50
Interest
=
P 15,375
(P153,750 X 10%)
(P11,000) (P 33,000)
Partnership Operations
21
2-7: c Date
January 1 April 1 June 1 September 1
Capital Balance
Months Unchanged
P16,000 17,600 19,200 15,200
Average Capital(P201,600/12) Capital(P201,600/12) =
Peso Months
3 2 3 4
P 48,000 35,200 57,600 __60,800
12
P201,600
P16,800
2-8: a
Net profit before bonus Net profit after bonus (P24,000/120%)
P 24,000 __20,000
Bonus to RJ Balance (P24,000-P4,000)X3/5
4,000 __12,000
Total profit share
P 16,000
2-9: a LT
AM
Total
Interest Salaries Balance, 3:2
P3,200 15,000 (11,580)
P 3,600 7,500 ( 7,720)
P 6,800 22,500 ( 19,300)
Total
P 6,620
P 3,380
P 10,000
2-10: b
Net income after salary, interest and bonus Add back: back: Salary Salary (P10,0 (P10,000 00 X 12) 12) Interest (P250,000 X .05)
P467 P467,5 ,500 00 P120,0 P120,000 00 __12,500
_132,500
Net income after bonus (80%) Net Net inco incom me befo before re bon bonus (P6 (P600,0 00,000 00/8 /80 0%)
P600,000 _750, 750,00 000 0
Paul's bonus
P150,000
2-11: b CC
Salary Balance Additional profit to DD
P14,000 ( 1,500)
Total
P12,500
Net income
Fees Earned Expenses
P90,000 _48,000
Net Income
P42,000
DD
EE
Total
P 8,400 __2,100
P 14,000 5,600 ( 60 600)
P 14,000 28,000 ______ –
P10,500
P 19,000
P 42,000
22
Chapter 2
2-12: c LL
Interest Annual Salary Additional profit to give LL, P20,000 Additional profit to give MM, P14,000 Total *(P9,500/50%) = P19,000
MM
NN
P 2,000 P 1,250 8,500 – 9,500 5,700 _____ – __7,050 P20,000 P14,000
Total
P 750
– 3,800 _____ – P 4,550
P 4,000 8,500 19,000* __7,050 P 38,550
2-13: a RR
Excess (Deficiency) RR (P80,000 - P95,000) SS (P50,000 - P40,000) Balance 4:3:1 Total Net Income
(200,000 - 100,000) =
SS
P15,000
TT
Total
– ) – )
–
– (P10,000) _47,500
_35,625
_11,875
P 5,000 __95,000
P62,500
P25,625
P11,875
P100,000
BB
CC
P100,000
2-14: b
AA
AA - 100,000 X 10% 150,000 X 20% Remainder, 210,000 BB (60,000 X .05) CC (60,000 X .05) Balance, equally
P 10,000 30,000
__68,000
Total
P108,000
Total
) )
P 40,000
_68,000
) P 3,000 _68,000
6,000 _204,000
P71,000
P71,000
P250,000
P 3,000
2-15: a AJ
Bonus to CJ Net profit before bonus P44,000 Net profit after bonus (P44,000/110%)P40,000 – – Interest to BJ – Salaries P 10,000 Balance, 4:4:2 __6,800 Total
P 16,800
BJ
CJ
Total
P4,000 P1,000
–
– _6,800
12,000 __3,400
P4,000 1,000 22,000 _17,000
P7,800
P19,400
P44,000
2-16: c
Total profit share of Pedro Less: Salary to Pedro Interest
P200,000 P 50,000 __20,000
Share in the balance (40%) Net profit after salary and interest (130,000/40%) Add: Total Salaries Total Interest Total Partnership Income
__70,000 P130,000 P325,000
P150,000 __70,000
_220,000 P545,000
Partnership Operations
23
2-17: c
Net income before extraordinary gain and bonus (69,600-12,000) Net income after bonus (57,600/120%) Bonus to RR
P 57,600 _48,000 P 9,600
Distribution of Net Income: JJ
Bonus Balance, equally
RR
Total
P 24,000
P 9,600 24,000
P 9,600 48,000
Net profit before extraordinary gain Extraordinary gain
P 24,000 __4,800
P 33,600 __7,200
P 57,600 _12,000
Total
P 28,800
P 40,800
P 69,600
Mel
Jay
Total
Interest Annual Salary Remainder 60:40
P 20,000 36,000 __60,000
P 12,000 _40,000
P 32,000 36,000 _100,000
Total
P116,000
P 52,000
P168,000
DV
JE
FR
Total
P 15,000 ( 36,875)
P 3,750 ( 22,125)
(P 7,500) ( 14,750)
P 11,250 ( 73,750)
(P 21,875)
(P 18,375)
–
2-18: a
–
2-19: a
Interest on excess (Deficiency) Remainder 5:3:2 Total
(P 22,250) (P 62,500)
2-20: c
Correction of 2013 profit: Net income per books Understatement of depreciation Overstatement of inventory, December 31 Adjusted net income
Distribution of net income per book: Equally Distribution of adjusted net income Equally Required Decrease
P 19,500 ( 2,100) ( 11,400) P 6,000 Pete
Rico
Total
P 9,750
P 9,750
P 19,500
( 3,000)
( 3,000)
( 6,000)
P 6,750
P 6,750
P 13,500
Tiger
Woods
Total
2-21: a
Salaries Interest Bonus (P360,000-P54,000)X.25 Remainder, 30:70
P 64,000 24,000 76,500 __19,650
P100,000 30,000
P164,000 54,000 – 76,500 __45,850 __65,500
Total
P184,150
P175,850
P360,000
24
Chapter 2
2-22: a Holly
Field
P 20,000
–
–
P 25,000 33,600
Salaries Commission Interest Bonus, schedule 1 Remainder, 60:40
32,000 30,000 __35,640
Total
P117,640
Total
_23,760
P 20,000 25,000 65,600 30,000 __59,400
P 82,360
P200,000
–
Schedule 1
Net income before salary, commission, interest and bonus Less: salaries Net income before bonus Net income after bonus (P180,000/120%) Bonus
P200,000 __20,000 P180,000 _150,000 P 30,000
2-23: a Mike
Tyson
Total
Capital balance, beginning Additional investment Capital withdrawal Capital balance before profit and loss distribution
P600,000 100,000 -200,000 P500,000
P400,000 P1,000,000 200,000 300,000 ( 100,000) _-300,000 P500,000 P1,000,000
Net income: Salary Balance, 3:2 Total
P200,000 __60,000 P260,000
P300,000 P 500,000 __40,000 __100,000 P340,000 P 600,000
Total Drawings
P760,000 ( 200,000)
P840,000 P1,600,000 ( 300,000) ( 500,000)
Capital balance, end
P560,000
P540,000 P1,100,000
Average Capital - King: Date
Capital Balance
Months Unchanged
Peso Months
January 1 April 1
P40,000 55,000
3 9
P120,000 _495,000
12
P615,000
Months Unchanged
Peso Months
Average capital – P615,000/12 = P51,250 Average Capital - Queen: Date
Capital Balance
January 1 April 1
P100,000 130,000
Average capital - P1,350,000 / 12 =P112,500
7 5
P700,000 __650,000
12
P1,350,000
Partnership Operations
25
2-24: d
Distribution of Net Income - Schedule 1
Interest Bonus, Schedule 2 Salaries Residual, 50:50 Total
King
Queen
Total
P 5,125 12,725 25,000 ( 2,050) P40,800
P11,250
P16,375 12,725 55,000 _(4,100) P80,000
– 30,000 _(2,050) P39,200
Schedule 2
Net income before allocation Less: Interest
P80,000 _16,375
Net income before bonus Net income after bonus (P63,625/125%) Bonus
P63,625 _50,900 P12,725
Capital Balance December 31: King
Queen
Total
Capital balance, January 1 Additional investment Capital balance before profit and loss distribution Net income (Schedule 2) Drawings (P400 X 52)
P40,000 _15,000
P100,000 __30,000
P140,000 __45,000
P55,000 40,800 ( 20,800)
P130,000 39,000 ( 20,800)
P185,000 80,000 ( 41,600)
Capital balance, December 31
P75,000
P148,400
P223,400
2-25: d
Total receipts (P1,500,000 + P1,625,000) Expenses
P3,125,000 ( 1,080,000)
Net income
P2,045,000
Distribution to Partners Red – P1,500,000/P3,125,000 X P2,045,000 = Blue – P1,625,000/P3,125,000 X P2,045,000 =
P 981,600 (1) _1,063,400
P2,045,000 Capital balance of Blue Dec. 31 Capital Balance, Jan. 1 Additional investment Capital balance before profit and loss distribution Profit share Drawings Capital balance, Dec. 31
P 374,000 ___22,000 P 396,000 1,063,400 ( 750,000) P 709,400 (2)
26
Chapter 2
2-26: a Ray
Sam
Total
P150,000 _______
P180,000 __60,000
P330,000 __60,000
150,000
240,000
390,000
15,000 51,000
20,000 34,000
35,000 85,000
66,000
54,000
120,000
Total Salaries
216,000 _18,000
294,000 _24,000
510,000 _42,000
Total Drawings
234,000 (18,000)
318,000 (24,000)
552,000 (42,000)
Capital balances, March 1 Additional investment, Nov. 1 Capital balances before salaries, profit and Drawings Profit share: Interest Balance, 60:40 Total
Capital balances, Feb. 28
P216,000
P294,000
P510,000
Susan
Tanny
Total
P150,000 8,000 _______
P30,000
158,000
24,000
2-27: a
Capital balances, 1/1 Additional investment, 4/1 Capital withdrawals, 7/1 Balances before profit distribution Profit distribution: Interest Bonus (20% x P30,000) Balance, equally Total Total Drawings Capital balances, 12/31
23,400
P180,000 8,000 (6,000) _(6,000) 182,000
(1,725)
4,050 6,000 (1,725)
27,450 6,000 (3,450)
21,675
_8,325
30,000
179,675 (12,000)
32,325 (12,000)
212,000 (24,000)
P167,675
P20,325
P188,000
Partnership Operations
27
2-28: a Sin
Capital balances, beg. 1st year Loss distribution, 1st year: Salaries Interest Balance, 5:3:2
P110,000
P80,000
Uy
P110,000
Total
P300,000
8,000 (16,000)
10,000 11,000 (24,000)
30,000 30,000 (80,000)
( 9,000)
( 8,000)
( 3,000)
(20,000)
101,000 (10,000)
72,000 (10,000)
107,000 (10,000)
280,000 (30,000)
91,000
62,000
97,000
250,000
20,000 9,100 ( 7,500)
6,200 ( 4,500)
10,000 9,700 ( 3,000)
30,000 25,000 (15,000)
21,600
_1,700
16,700
40,000
Total Drawings
112,600 _(10,000)
63,700 (10,000)
113,700 _(10,000)
290,000 _(30,000)
Capital balances, end of 2nd year
P102,600
P53,700
P103,700
P260,000
Total Total Drawings Capital balances, beg. 2nd year Profit distribution, 2nd year: Salaries Interest Balance, 5:3:2 Total
20,000 11,000 (40,000)
Tan
2-29: c Jay
Capital balances, 1/1/11 Additional investment, 2011 Capital withdrawal, 2011
Kay
P30,000
P30,000
_(5,000)
_(4,000)
Capital balances Profit distribution, 2011: Interest Salary Balance, equally
25,000 3,000 7,000 _1,000
Capital balances, 1/1/12 Additional investment, 2012 Capital withdrawal, 2012
36,000 5,000 ______
Capital balances Profit distribution, 2012: Interest Salary Balance, equally Capital balances, 1/1/13 Additional investment, 2013 Capital withdrawal, 2013
Loi
Total
P30,000 5,000 ______
P90,000 5,000 _(9,000)
26,000
35,000
86,000
3,000
3,000
_1,000
_1,000
9,000 7,000 __3,000
30,000
39,000
_(3,000)
_(8,000)
105,000 5,000 (11,000)
41,000
27,000
31,000
99,000
3,600 7,000 _1,500
3,000
3,900
_1,500
_1,500
10,500 7,000 __4,500
53,100
31,500
______
_(4,000)
36,400 6,000 _(2,000)
121,000 6,000 _(6,000)
Capital balances Profit distribution, 2013: Interest Salary Balance, equally
53,100
27,500
40,400
121,000
5,310 7,000 __3,300
3,150
3,640
__3,300
__3,300
12,100 7,000 ___9,900
Capital balances, 12/31/13 per books Understatement of depreciation
P68,710 (2,000)
P33,950 (2,000)
P47,340 (2,000)
P150,000 (6,000)
Adjusted capital balances, 12/31/13
P66,710
P31,950
P45,340
P144,000
28
Chapter 2
2-30: a Ken
Capital balances, 1/1/12 Additional investment, 2012 Capital withdrawal, 2012
P100,000
Balances Profit distribution, 2012 (Schedule 1) Salary Balance, beg. Capital ratio Capital balances, 1/1/13 Capital withdrawal, 2013
Len
Mon
Total
P100,000
( 20,000)
P100,000 40,000 _______
_______
P300,000 40,000 ( 20,000)
80,000
140,000
100,000
320,000
20,000
20,000
60,000 20,000
60,000 60,000
100,000 ( 20,000)
160,000 ( 40,000)
180,000 _______
440,000 ( 60,000)
80,000
120,000
180,000
380,000 60,000 __60,000 P500,000
Balances Profit distribution, 2013: Salary Balance, beg. capital ratio
__13,636
__21,818
60,000 __24,546
Capital balances, 12/31/13
P 93,636
P141,818
P264,546
Schedule 1 – Computation of net profit:
Total capital, 2013 (P647,500 – P147,500) Total capital, 2012 (P300,000 + P40,000 – P80,000)
P500,000 _260,000
Total profit for 2 years
P240,000
Net profit per year (P240,000 / 2)
P120,000
2-31: d
Capital balance, 1/1/13 Additional investment Withdrawals Cap. bal. before P/L dist. NP: Salary (16,500 x 12) Interest on EC (15%) Balance 25:30:45 Total Capital balance 12/31/13
_ Nardo_ P280,000 96,000 376,000 42,000 ( 19,875 ) 22,125 P398,125
__Orly
P300,000 60,000 ( 90,000 ) 270,000 198,000 45,000 ( 23,850 ) 219,150 P 489,150
__Pedro_
_Total_
P170,000 ( 72,000 ) 98,000 25,500 ( 35,775 ) ( 10,275 ) P 87,72
P750,000 156,000 (162,000) 744,000 198,000 112,500 (79,500 ) 231,000 P975,000
2-32: d
Sam capital, beginning Additional investment (Land) Drawings Capital balance before net profit (loss) Capital balance, end Profit share (40%) Net profit (P50,000 ÷ 40%)
P120,000 60,000 ( 80,000 ) 100,000 150,000 50,000 P125,000
Partnership Operations
29
2-33: a
__ Joe__ Capital balance, 1/2/12 P 80,000 Net loss- 2012: Annual salary 96,000 10% interest on beg. capital 8,000 Bal. beg. cap. ratio: 8:4 ( 108,000) Total ( 4,000) Capital balance 76,000 Drawings ( 4,000) Capital balance, 12/31/12 72,000 Net profit- 2013: Annual salary 96,000 10% interest on BC 7,200 Bonus to Joe – NPBB – P 22000 NPAB (22000/110%)20000 2,000 Balance equally ( 67,300) Total 37,900 Total 109,900 Drawings ( 4,000) Capital balance, 12/31/13
__Tom__
__Total__
P 40,000
P120,000
48,000 4,000 ( 54,000) ( 2,000) 38,000 ( 4,000) 34,000
144,000 12,000 ( 162,000) ( 6,000) 114,000 ( 8,000) 106,000
48,000 3,400
144,000 10,600
( 67,300) ( 15,900) 18,100 ( 4,000)
2,000 ( 134,600) 22,000 128,000 ( 8,000)
14,100
120,000
105,900
2-34: a
Decrease in capital Drawings Contribution Profit share Net income (45,000 ÷ 30)
P 60,000 ( 130,000) 25,000 45,000 P150,000
2-35: b 2-36: a
Gabriel
Interest Bonus Salaries Remainder Total 2-37:
P11,466.65 12,000 35,000 11,280 P69,747
Harry
P 5,333.36 40,000 16,920 P62,253
Partnership Operations
30
2-38: a
Thus, the entry should be: Cash Alma, Capital Betty, Capital Cora, Capital
400,000 33,600 33,600 467,200
2-39: b Note: It should be “Riza” instead of “ Rizal”
2-40: a Romeo
Less: Add:
Equity Balance Beginning Balance Additional Investments Withdrawals Remainder Divided by Total remainder
P142,200 85,000 40,000 35,000 52,200 __60% P 87,000
Remainder Salaries Bonus Total Income for 2013:
P 87,000 93,000 21,750 P201,750
Bonus check: 25% (201,750-93,000-X) = 50,437.50-23,250-0.25X 1.25X= 27,187.50 X= 21,750
31
Chapter 2
SOLUTIONS TO PROBLEMS Problem 2 – 1
1.
Castro Diaz
: :
(P26,000/P42,500) x (P16,500/P42,500) x
P23,800 P23,800
= =
P14,560 __9,240 P23,800
2.
Castro Diaz
: :
(P31,250/P50,000) x (P18,750/P50,000) x
Computation of Average Capitals: Castro: Date
1/1 ..................................... 4/10 ................................... 5/1 ..................................... 8/1 .....................................
Average capital = P375,000
P23,800 P23,800
Months Unchanged
Peso Months
P26,000 29,000 36,000 32,000
3 1 3 5 12
P 78,000 29,000 108,000 _160,000 P375,000
Date
Capital Balances
1/1 ..................................... 6/1 ..................................... 9/1 .....................................
P16,500 21,500 19,500
Average capital = P225,000 – 12 months = 3.
P14,875 __8,925 P23,800
Capital Balances
12 months =
Diaz:
= =
Castro
P31,250 Months Unchanged
Peso Months
5 3 4
P 82,500 64,500 __78,000
12
P225,000
P18,750 Diaz
Total
Interest ........................................................ Salaries........................................................ Balance, equally..........................................
P 7,500 36,000 ( 24,100)
P4,500 24,000 (24,100)
P12,000 60,000 ( 48,200)
Total............................................................
P19,400
P 4,400
P23,800
Castro
Diaz
Total
P 4,760 1,100 _10,764 P16,624
P –
P 4,760 1,100 _17,940 P23,800
4.
Bonus (a) .................................................... Interest (b)................................................... Balance, 3:2................................................ Total............................................................
– _7,176 P7,176
Partnership Operations
32
Computations:
a.
b.
5.
Castro Diaz
Net profit before bonus................................................. Net profit after bonus (P23,800 ÷ 125%) .....................
P23,800 _19,040
Bonus............................................................................
P 4,760
Average capital of Castro [ (P26,000 + P32,000) 2]........................... Average of Diaz [ (P16,500 + P18,500) 2]....... .................................. Castro's excess..................................................... .................................. Multiply by.......................................................... ..................................
P29,000 _18,000 P11,000 ___10%
Interest................................................................. ..................................
P 1,100
: :
(P3,000/P5,000) x P23,800 (P2,000/P5,000) x P23,800
= =
P14,280 __9,520 P23,800
Problem 2 – 2
a.
Average Capital: Robin: Date
Jan. 1 Feb. 28 Apr. 30 Sept. 30
Balances
Months Unchanged
Peso Months
P135,000 95,000 175,000 195,000
2 2 5 3
P270,000 190,000 875,000 __585,000
12
P1,920,000
Ave. Capital (P1,920,000 12) = P160,000 Hood:
Date
Balances
Months Unchanged
Jan. 1 Mar. 31 June 30 Aug. 31 Oct. 31
P140,000 200,000 150,000 220,000 200,000
3 3 2 2 2 12
Ave. Capital (P2,160,000 12) = P180,000 Profit Distribution : Robin : P160,000 P340,000 x P510,000 = Hood : P180,000 P340,000 x P510,000 =
P240,000 _270,000
Peso Months
P420,000 600,000 300,000 440,000 __400,000 P2,160,000
P510,000 33
Chapter 2
b.
Robin
Hood
Total
Interest on ave. capital ......................................... Salaries................................................................. Bonus (P510,000 – 30,600 – 160,000) x 25%).... Balance, equally...................................................
P 14,400 60,000 78,850 _119,775
P 16,200 100,000 _119,775
P 30,600 160,000 79,850 _239,550
Totals ...................................................................
P274,025
P235,975
P510,000
Robin
Hood
Totals
249,000
P 6,000 249,000
P 12,000 498,000
255,000
255,000
510,000
Robin
Hood
Total
Salaries................................................................. P 80,000 P120,000 Bonus (see computations below) . ........................ 62,000 Balance, equally................................................... _124,000 _124,000 Totals ................................................................... P266,000 P244,000 Bonus Computations : Net income before salaries and bonus......... ..................... ....................... Less Salaries................................................ ..................... .......................
P200,000 62,000 _248,000 P510,000 P510,000 200,000
Net income before bonus ............................ ..................... ....................... Net income after bonus (P310,000 125%)..................... ....................... Bonus .......................................................... ..................... .......................
310,000 _248,000 P 62,000
c.
Interest: Robin (P195,000 – P135,000) 10%............. Hood (P200,000 – P140,000) 10% ............. Balance, equally................................................... Totals ................................................................... d.
–
P 6,000
Problem 2 – 3 a.
Salaries................................................................. Commission (2% x P1,000,000).......................... Interest of 8% on average capital......................... Bonus (see computations below)......................... Balance, equally...................................................
De Villa
De Vera
P 30,000
–
32,800 9,818 __44,182
P 20,000 31,200 9,818 __44,182
Total..................................................................... P116,800 P105,200 Bonus Computations : Income before salary, commissions, interest & bonus...... ....................... Salary and commission (P30,000 + P20,000) ................... ....................... Interest......................................................... ..................... ....................... Income before bonus................................... ..................... ....................... Income after bonus (P108,000 110%) ..... ..................... ....................... Bonus .......................................................... ..................... ....................... b.
Income Summary.................................................
P 222,000
Total
P 30,000 20,000 64,000 19,636 __88,364 P222,000 P222,000 ( 50,000) ( 64,000) 108,000 _98,182 P 9,818
De Villa, capital .......................................... De Vera, capital...........................................
116,800 105,200
Partnership Operations
34
Problem 2 – 4 a.
Salaries................................................ Bonus (see computation below).......... Interest (see computation below) ........ Balance, 3:3:4 ..................................... Total....................................................
East
North
West
Total
P15,000 3,760 2,800 __3,180 P24,740
P20,000
P18,000
4,000 __3,180 P27,180
4,800 __4,240 P27,040
P53,000 3,760 11,600 _10,600 P78,960
Bonus computations :
Net income before bonus ........... .................... ..................... ..................... Net income after bonus (P78,960 105%)..... ..................... ..................... Bonus ......................................... .................... ..................... .....................
P78,960 _75,200 P 3,760
Interest computations:
East (10% x P28,000)................. .................... ..................... ..................... North (10% x P40,000) .............. .................... ..................... ..................... West (10% x P48,000) ............... .................... ..................... ..................... Total........................................... .................... ..................... ..................... b.
Interest (see computations below) ...... Salaries................................................ Bonus (see computations below) ........ Balance, equally.................................. Total....................................................
P 2,800 4,000 __4,800 P11,600
East
North
West
Total
P 3,133 24,000
P 3,633 21,000 4,280 ( 6,055) P 22,858
P 5,200 25,000
P11,966 70,000 4,280 ( 18,166) P 68,080
( 6,056) P 21,077
( 6,055) P 24,145
Interest computations :
Average capitals: East: Date
Balances
1/1 5/1 9/1
P30,000 36,000 28,000
Average capital (P376,000
Months Unchanged
4 4 4
P120,000 144,000 _112,000
12
P376,000
12) ..........................................
North: Date
Balances
1/1 3/1 7/1 9/1
P40,000 31,000 36,000 40,000
Pesos Months
Months Unchanged
P 31,333 Pesos Months
2 4 2 4
P80,000 124,000 72,000 _160,000
12
P436,000
Average capital (P436,000
12)...........................................
P 36,333
35
Chapter 2
West: Date
Balances
1/1 4/1 6/1 8/1
P50,000 57,000 60,000 48,000
Ave. capital (P624,000
Months Unchanged
Pesos Months
3 2 2 5 12
P150,000 114,000 120,000 _240,000 P624,000
12)....................................
P 52,000
East (10% x P31,333)............ ............................................... North (10% x P36,333) ......... ............................................... West (10% x P52,000)........... ............................................... Total ... .................................. ...............................................
P 3,133 3,633 __5,200 P 11,966
Interest Computations :
Bonus Computations :
Net income ............................ ............................................... Less Salary ............................ ............................................... Net income before bonus....... ............................................... Net income after bonus (P47,080 110%) ........................... Bonus to North ...................... ............................................... * To Total c.
East
West
Total
8,990
P21,000 P 18,000 – 3,000 4,000 5,000 _13,180 _11,532.50 __8,237.50 P37,180 P33,532.50 P22,227.50
P 8,990 39,000 12,000 _32,950 P92,940
Net income before salaries & bonus ............... ..................... ..................... Less Salaries (P21,000 + P18,000) ................. ..................... ..................... Net income before bonus ........... .................... ..................... ..................... Net income after bonus (P53,940 120%)..... ..................... ..................... Bonus to West............................ .................... ..................... .....................
P92,940 _39,000 P53,940 _44,950 P 8,990
Bonus (see comp. below).................... Salaries ........................................... Interest on beginning capital............... Remainder, 8:7:5................................. Total........ ...........................................
North
P 68,000 _21,000 47,080 _42,800 P 4,280
P
Bonus Computations :
Problem 2 – 5 a.
Schedule of Income Distribution:
Salaries.... ........................................... Interest (see computation on p. 30) .....
Maria
Clara
Rita
Total
P12,000 7,200
P10,000 9,600
P 8,000 13,800
P30,000 30,600
Balance, equally.................................. Total........ ...........................................
__3,133 P22,333
__3,133 P22,733
__3,134 P24,934
Partnership Operations
__9,410 P70,000 36
Interest on Average Capital:
Maria: P80,000 x 8% x 6 months.. .................... P100,000 x 5% x 6 months .................... Clara: P120,000 x 8% .................. .................... Rita: P180,000 x 8% x 9 Mos. ... .................... P150,000 x 8% x 3 Mos. ... .................... Total ........................................... .................... b.
P 3,200 __4,000
P 7,200 9,600
P10,800 __3,000
_13,800 P30,600
Statement of Partners Capital :
Balances, Jan. 1................................... Additional Investment ........................ Capital Withdrawal............................. Net Income.......................................... Drawings ........................................... Balance, Dec. 31.................................
Maria
Clara
Rita
Total
P 80,000 20,000
P120,000
P180,000
–
–
– –
22,333 ( 10,000) P112,333
22,733 ( 10,000) P132,733
( 30,000) 24,934 ( 10,000) P164,934
P380,000 20,000 ( 30,000) 70,000 ( 30,000) P410,000
Benny
Celia
Total
Problem 2 – 6
1.
Allocation of net loss for 2013: Alvin
2.
Salary to Alvin .................................... Interests on average capital: Alvin (P120,000 x 10%) ............ Benny (P200,000 x 10%) ........... Celia (P220,000 x 10%) ............. Balance, 30:30:40 ...............................
P 20,000
(29,400)
Total........ ...........................................
P 2,600
P20,000
12,000 20,000 _(29,400)
22,000 _(39,200)
54,000 _(98,000)
P( 9,400)
P(17,200)
P(24,000)
Statement of Partnership Capital Year Ended December 31, 2013 Alvin
Capitals, January 1, 2013.................... Additional investments . ...................... Capital withdrawals ............................ Balances.. ........................................... Net loss (see above)............................ Balances.. ...........................................
P120,000 _______ 120,000 __2,600 122,600
Benny
P180,000 60,000 ________ 240,000 __(9,400) 230,600
Celia
P220,000 40,000 _(20,000) 240,000 _(17,200) 222,800
Total
P520,000 100,000 _(20,000) 600,000 _(24,000) 576,000
Drawings. ........................................... Capitals, December 31, 2013..............
_(16,000) P106,600
_______ P230,600
_______ P222,800
37
3.
_(16,000) P560,000 Chapter 2
Correcting entry:
Celia capital ........................................ 2,400 Alvin capital............................... 2,200 Benny capital ............................. 200 To correct capital accounts for error in loss allocation computed as follows: Correct loss allocation ........................ Actual loss allocation.......................... Adjustment..........................................
Alvin
Benny
P2,600 __(400) P2,200
P(9,400) __9,600 P 200
Celia
P(17,200) __14,800 P ( 2,400)
Problem 2 – 7 Dino
Nelson
Oscar
Total
Capital balances, 1/2/11............................... P45,000 Additional investment, 2011 ....................... _15,000 Balances....................................................... 60,000 Net income (Loss) - 2011, equally.............. (1,800) Withdrawals, 2011....................................... (17,000)
P45,000 _15,000 60,000 ( 1,800) ( 7,000)
P45,000 __6,000 51,000 ( 1,800) ( 3,200)
P135,000 __36,000 171,000 ( 5,400) ( 27,200)
Capital balances, 12/31/11........................... 41,200 Additional investment, 2012 ....................... _____ – Balances....................................................... 41,200 Net income - 2012, 40: 30: 30..................... 10,800 Withdrawals, 2012....................................... (17,000)
51,200 _____ – 51,200 8,100 ( 7,000)
46,000 __6,000 52,000 8,100 ( 3,200)
138,400 ___6,000 144,400 27,000 ( 27,200)
Capital Balances, 12/31/12.......................... 35,000 52,300 Additional investment, 2013 ....................... ______ – ______ – Balances....................................................... 35,000 52,300 Net income, 2013 (schedule 1).................... 56,365 42,272 Withdrawals, 2013....................................... (19,000) ( 9,000)
56,900 ___6,000 62,900 20,363 ( 3,200)
144,200 ___6,000 150,200 120,000 ( 31,200)
Capital balances, 12/31/13...........................
P72,365
P86,572
P80,063
P239,000
Dino
Nelson
Oscar
Total
Annual salaries.................................... P48,000 Bonus (see computations below)........ – Interest ................................................ 3,600 Balance, equally.................................. _* 4,765
P24,000 10,909 3,600 __4,763
P12,000 3,600 __4,763
P84,000 10,909 10,800 __14,291
P43,272
P20,363
P120,000
Net income before bonus ........... ................ ..................... ..................... Net income after bonus (P120,000 110%)..................... ..................... Bonus to Nelson......................... ................ ..................... .....................
P120,000 _109,091 P 10,909
Schedule 1:
Totals ..................................................
P56,365
–
Bonus computations:
* To Total Partnership Operations
38
Problem 2 – 8 Red, White & Blue Partnership Statement of Partners' Capital For Year Ended December 31, 2013
Balances, beginning of year Add: 20% of fees billed to personal clients Green's share of fees (Exhibit A) Remaining net income (Exhibit A) Subtotals Less: Withdrawals Uncollectible accounts identified with clients of each partner Excess rent charged to Blue Total deductions Balances, end of year
Red
White
Blue
40,200 8,800
20,200 4,800
40,600 4,400
Green
Total
P101,000 18,000 3,200 _57,000
_22,800
_22,800
_11,400
3,200 ______
_71,800
_47,800
_56,400
__3,200
179,200
10,400
8,800
11,600
5,000
35,800
2,400
900
3,300 1,800
1,800 P12,800
P 9,700
P13,400
P 5,000
P 40,900
P59,000
P38,100
P43,000
P (1,800)
P138,300
Red, White & Blue Partnership Exhibit A – Computation and Division of Net income For Year Ended December 31, 2013
Total revenue from fees Expenses, excluding depreciation and doubtful accounts expense Less: Excess rent charged to N ($300 x 6)
P120,000 P38,700 __1,800
Subtotal Add: Depreciation, computed as follows: $26,000 x 0.10 $10,000 x 0.10 x 1/2
36,900 2,600 ____500
Total expenses, excluding doubtful accounts expense Add: Doubtful accounts expense ($3,000 x 0.60) Total expenses
P40,000 __1,800 41,800
Net income for year ended Dec. 31, Year 1 Division of net income: Fees billed to personal clients: Red P44,000 x 20% White P24,000 x 2% Blue, P22,000 x 20% Green's share of fees: Gross fees from new clients after April 1, Year 1 Less: Allocated expenses ($40,000 x $24,000/ $120,000) Net income from new clients Green's share (P16,000 x 20%) Total divided pursuant to special agreement Balance, divided in income-sharing ratio as follows: To Red, 40% To White, 40%
________ P 78,200
P 8,800 48,000 4,400
P18,000
24,000 __8,000 P16,000 P 3,200 __21,200 P 57,000 P22,800 22,800
To Blue, 20%
_11,400
Total
P57,000 Chapter 2
39
Problem 2 – 9 Allan, Eman and Gino Partnership Statement of Profit Distribution Year Ended December 31, 2013 Allan
Eman
Gino
Total
P 4,000
P 250 1,112 _5,925
P 5,000 2,224 _17,776
Interest Commission (P16,120 – P5,000) x 10% Balance, equally
__5,926
P 750 1,112 _5,925
Total Adjustments (50% of P25,000 to Allan)
P 9,926 __2,574
P7,787 (1,287)
P7,287 (1,287)
P25,000 _____ –
Total
P12,500
P6,500
P6,000
P25,000
Sonny
Letty
Total
–
Problem 2 – 10
Gary, Sonny, and Letty Partnership Statement of Partners' Capital Accounts Year Ended December 31, 2013 Gary
Capital balances, 1/1/13 Additional investments
P210,000 ___9,100
P180,000 _______
P 90,000 _______
P480,000 __9,100
Total Profit distribution: Salaries Interest Bonus to Gary and Sonny (Schedule 1) Balance, equally
_219,100
_180,000
_90,000
489,100
13,680 25,920
11,520 21,600
10,640 10,800
35,840 58,320
–
–
__(9,720)
_(9,720)
_(9,720)
(29,160)
__29,880
_23,400
_11,720
_65,000
Total Drawings
248,980 _(21,000)
203,400 (18,000)
101,720 __(9,000)
554,100 _(48,000)
Capital balances, 12/31/13
P227,980
P 92,720
P506,100
Total
P185,400
Schedule 1: Computation of the bonus.
Net profit before interest, salaries and bonus Less:Salaries Interest Net profit (loss) before bonus
P 65,000 P35,840 _58,320
__94,160 P(29,160)
–
Therefore no bonus is to be given to Gary and Sonny. Partnership Operations
40
Problem 2 – 11
a. Entries to record the formation of the partnership and the events that occurred during 2013: Cash Inventory Land Equipment Mortgage payable Installment note payable Kobe, capital (P600,000 + P800,000 + P1,000,000 – P200,000) Lebron, capital (P500,000 + P1,300,000 - P500,000) (1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Inventory Cash Accounts payable
1,100,000 800,000 1,300,000 1,000,000 500,000 200,000 2,200,000 1,300,000 300,000 240,000 60,000
Mortgage payable Interest expense Cash
50,000 20,000
Installment note payable Interest expense Cash
35,000 20,000
Accounts receivable Cash Sales
70,000
55,000 210,000 1,340,000 1,550,000
Selling and general expenses Cash Accrued expenses payable
340,000
Depreciation expense Accumulated depreciation
60,000
Kobe, drawing Lebron, drawing Cash Sales
278,000 62,000
60,000 104,000 104,000 208,000 1,550,000
Income summary (9)
Cost of goods sold Inventory P900,000 = P800,000 beginning inventory
1,550,000 900,000 900,000
+ 300,000 purchases - 200,000 ending inventory 41
Chapter 2
Income summary Cost of good sold Selling and general expenses Depreciation expense Interest expense
1,340,000 900,000 340,000 60,000 40,000
Income summary Kobe, capital Lebron, capital
210,000
Kobe, capital Lebron, capital Kobe, drawing Lebron, drawing
104,000 104,000
105,000 105,000
104,000 104,000
Schedule to allocate partnership net income for 2013: Kobe
Profit percentage 60% Beginning capital balance P2,200,000 Net income (P1,550,000 revenue - P 1,340,000 expenses) Interest on beginning capital balances (3%) 66,000 Salaries Residual deficit Total b.
Lebron
40% P1,300,000
Total
100% P3,500,000 210,000
39,000
120,000
120,000
(81,000) P105,000
(54,000) P105,000
(105,000) P105,000 (240,000) P(135,000) (135,000) -0-
Kobe-Lebron Partnership Income Statement For the Year Ended December 31, 2013
Sales Less: Cost of goods sold: Inventory, January 1 Purchases Goods available for sale Less: Inventory, December 31 Gross profit Less: Selling and general expenses Depreciation expenses Operating income Nonoperating expense- interest Net income
P1,550,000 P800,000 300,000 P1,100,000 (200,000) 340,000 60,000
(900,000) P650,000 400,000 P250,000 (40,000) P210,000
Partnership Operations
c.
42
Kobe-Lebron Partnership Balance Sheet At December 31, 2013
Assets Cash Accounts receivable Inventory Land Equipment (net) Total assets
P1,589,000 210,000 200,000 1,300,000 940,000 P4,239,000 Liabilities and Capital
Liabilities: Accounts payable Accrued expenses payable Installment note payable Mortgage payable Total liabilities Capital: Kobe, capital Lebron, capital Total capital Total liabilities and capital
P60,000 62,000 165,000 450,000 P737,000 P2,201,000 1,301,000 3,502,000 P4239,000
