6.
The partnership agreement of A, B and C stipulates the following:
• Partners A and C shall receive annual salaries of P12, 000 and P8, 000, respectively.
• A bonus of 10% of profit after salaries but before deduction of bonus shall be given to Partner
A, the managing partner.
• Each partner shall receive 10% interest on average capital investments.
• Any remaining profit or loss shall be shared as follows:
40% to A and 30% each to B and C.
The average capital investments of partners during the year are as follows:
A P100, 000
B 60, 000
C 120, 000
Case #1: The partnership earns profit of P100, 000.
Requirement: Compute for the respective shares of the partners on the partnership profit.
Case #2: The partnership earns profit of P10, 000.
Requirement: Compute for the respective shares of the partners on the partnership profit.
Case #3: The partnership incurs loss of P20, 000.
Requirement: Compute for the respective shares of the partners on the partnership loss.
Interest on weighted average capital
7. The partnership agreement of A and B provides that interest at 10% per year is to be credited to each
partner on the basis of weighted-average capital balances. A summary of B's capital account for the year
ended December 31, 20x1 is as follows:
Balance, Jan. 1, 20x1 252,000
Additional investment, July 172,000
Withdrawal, August 1 (27,000)
Balance, Dec. 31, 20x1 297,000
Requirement: Compute for the interest on B's weighted average capital.
(AICPA)
PROBLEM 3: EXERCISES
1. The partnership agreement A, B and C stipulates the following:
A, the managing partner, shall receive a bonus of 10% of profit.
Each partner shall receive a 6% interest on average capita] Investments.
Any remaining profit or loss shall be shared equally.
The average capital investments of partners during the year are as follows:
A P80, 000
B 50, 000
C 30, 000
Case #1: The partnership earns profit of P100, 000.
Requirement: Compute for the respective shares of the partners on the partnership profit.
Case #2: The partnership incurs loss of P20, 000.
Requirement: Compute for the respective shares of the partners on the partnership loss.
2. Partner A first contributed P50, 000 of capital into an existing partnership on March 1, 20x1. On June 1
20x1, Partner A contributed another P20,000. On September 1, 20x1, Partner A withdrew P15,000 from
the partnership. Withdrawal in excess of P10,000 is charged to the partner's capital account. The annual
interest rate applicable to capital contributions is 12%.
Requirement: Compute for the interest on the weighted average capital balance of Partner A in 20x1.
3. A&B Partnership earns profit of P240, 000 in 20x 1. The movements in the capital accounts of the
partners are shown below:
A, capital B, capital
Dr. Cr. Dr. Cr.
Jan. 1 120,000 80,000
May 1 20,000 10,000
July 1 20,000
Aug. 1 10,000
Oct. 1 10,000 5,000
Case #1: Compute for the partner’s respective shares if profits are to be divided based on average capital.
Case #2: Compute for the partners’ respective shares if the partners are entitled to 20% interest on the
ending balances of their capital accounts and any remainder is shared equally.
4. The Articles of Partnership of partners A and B stipulates the following:
Annual salary- of P60, 000 each.
Bonus to Partner A of 20% of the profit after partners, salaries, the bonus being “treated as an
expense" (i.e., the bonus is computed on profit after deducting both salaries and the bonus).
Balance to be divided equally.
Case #1: The partnership earns profit of P480, 000 before partners' salaries and bonus.
Requirement: Compute for the respective shares of the partners on the partnership profit.
Case #2: The partnership earns profit of P360, 000 after partners' salaries but before bonus.
Requirement: Compute for the respective shares of the partners on the partnership profit.
Case #3: The partnership earns profit of P300, 000 after partners' salaries and bonus.
Requirement: Compute for the respective shares of the partners on the partnership profit.
5. Partners A, B and C are capitalist partners while Partner D is an industrial partner. During the period,
the partnership incurred loss of P100,000. If the partnership agreement does not stipulate how profits and
losses are to be distributed, how much is the share of Partner D in the loss?
