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Partnership Profit & Loss Calculations

This document contains 4 problems related to partnership accounting. Problem 1 involves calculating capital balances, interest allowances, salary allowances, and bonuses for two partners. Problem 2 involves calculating partner bonuses based on profit in different scenarios. Problem 3 involves calculating interest allowances, salaries, and residual balances for three partners with a net loss. Problem 4 involves allocating net income, salaries, interest, and deficit distributions between three partners based on their capital ratios.

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Stella Sabaoan
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294 views3 pages

Partnership Profit & Loss Calculations

This document contains 4 problems related to partnership accounting. Problem 1 involves calculating capital balances, interest allowances, salary allowances, and bonuses for two partners. Problem 2 involves calculating partner bonuses based on profit in different scenarios. Problem 3 involves calculating interest allowances, salaries, and residual balances for three partners with a net loss. Problem 4 involves allocating net income, salaries, interest, and deficit distributions between three partners based on their capital ratios.

Uploaded by

Stella Sabaoan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Solution Partnership Operations -2nd assignment

Problem 1-
a. Ration of beginning capita balances
Allan: 60,000 x 40,000 / 100,000 = 24,000
Boom: 60,000 x 60,000 / 100,00 = 36,000
b. Ratio of weighted average capitals
Allan: 60,000 x 60,000 / 170,000 = 21,177
Boom : 60,000 x 110,000 /170,000 = 38,823
c. Interest of 12% on weighted ave. capitals, balance equally
Allan Boom Total
Interest on weighted ave.
Capital: 60,000 x12% 7,200 7,200
110,000 x 12% 13,200 13,200
Remainder (60,000 – 20,400) 19,800 19,800 39.600
Totals 27,000 33,000 600,000
d. Allan Boom Total
Salary allowances 30,000 30,000 60,000
Interest allowances 7,000 3,200 10,200
Bonus to Allan 31,700 31,700
Remainder equally
(190,200 – 101,900) 44,150 44,150 88,300
Totals 112,850 77,350 190,20
Computation for bonus
1.20 X = 190,200
= 190,200 / 1.20
= 158,500
.20X = 31,700
Or B=P– P
1 + Br

= 190,200 – 190,200/ 1.20

= 190,200 – 158,500

= 31,700

Problem 2- a. Bonus is based on profit before deducting bonus and income tax

B = 15% (300,000)

= 45,000

b. Bonus is based on profit after deducting bonus but before deducting income tax

B = 15% (300,000 – B)

= 45,000 / 1.15

= 39,130
c. Bonus is based on profit before deducting bonus but after deducting income tax

B = 15% (300,000 – T)

= 15% (300,000) – (30% x 300,000)

= 31,500

d. Bonus is based on profit after deducting bonus and income tax

a. If bonus is not treated as expense

B = 15% (300,000 – B –T)

= 15% (300,000) B – (30% x 300,000)

= 27,391

b. If bonus is treated as expense

B = 15% (300,000 –B- T)

= 15% [( 300,000) – B – (30% x 300,000 – B)]

= 26,360

Problem 3

Alpha Bravo Charlie Total

Net Loss (99,000)

Interest ave, cap

A : 360,000 x 10% 36,000

B : 180,000 x 10% 18,000

C : 120,000 X 10% 12,000 66,000

Salaries 90,000 60,000 150,000

Balance or residual: Equally (105,000) (105,000) (105,000) (315,000)

Increase (decrease) 21,000 (87,000) (33,000) 99,000

Problem 4
S (40%) T (35%) U (25% Total
Net income 300,000
Salary (20,000 x 12) 240,000 240,000
Interest:
S (400k x 10%) 40,000 40,000
T (350K x 10%) 35,000 35,000
U (250K x 10%) 25,000 25,000
Total 340,000
Deficit distribution (330K – 340K)
S (10,000 x 40%) (4,000) (4,000)
T (10,000 x 35% (3,500) (3,500)
U (10,000 x 25%) (2,500) (2,500)
Total distributed (net) 276,000 31,500 22,500 330,000
Journal entries
S, drawing 240,000
Cash 240,00
Income summary 330,000
S, capital 276,000
T, capital 31,500
U, capital 22,500
S, capital 240,000
S,drawing 240,000

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