1. A and B formed a partnership on March 1, 20x1.

The partnership agreement stipulates the following:

• Monthly salary allowances of P10,000 for A and P6,000 for B. Salary allowances are to be withdrawn by
the partners throughout the period and are to be debited to their respective drawings accounts.
• The partners share profits equally and losses on a 60:40 ratio.

During the period the partnership earned profit of P100,000 before salary allowances. How much is the share of
Partner B in the partnership profit?
a. 64,000
b. 60,000
c. 36,000
d. 0

2. The partnership agreement of A and B states the following:

• Monthly salary of P10,000 for A.
• 20% bonus to A, before deductions for salary, interest, and bonus.
• 10% interest on the weighted average capital of B.
• Balances is shared equally.

B’s weighted average capital balance is P200,000. The partnership reported profit of P60,000 for the year, net of
salaries, bonus, and interest. How much is the share of B in the profit?
a. 50,000
b. 151,300
c. 48,700
d. 200,000

3. Mr. A, a partner in ABC Co., is deciding whether to accept a salary of P8,000 or a salary of P5,000 plus a bonus
of 10% of profit. The bonus shall be computed on the profit before salaries and bonus. Salaries of the other
partners amount to P20,000. What amount of profit would be necessary so that Mr. A would be indifferent
between the choices?
a. 30,000
b. 33,000
c. 48,000
d. 58,000

4. A and B formed a partnership. The partnership agreement stipulates the following:

• Monthly salaries of P6,000 for A and P2,000 for B.
• 20% bonus to A, after deductions for salary, interest, and bonus.
• 10% interest on the weighted average capital of B.
• Any remaining amount is shared equally.

The partnership’s records show the following:

Revenues 150,000
Expenses (including salaries, interest, and bonus) (120,000)
Profit 30,000

The movements in B’s Capital account are as follows:

Beginning 60,000
Mar. 31 20,000 additional investment
Aug. 1 (30,000) capital withdrawal
Oct. 1 40,000 additional investment
Dec. 31 10,000 additional investment

How much is the share of B in the partnership profit?

a. 93,000
b. 52,250
c. 46,250
d. 45,000

5. X, Y, and Z are partners with average capital balances during 2018 of P120,000, P60,000, and P40,000,
respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P30,000
 to X and P20,000 to Y, the residual profit or loss is divided equally. In 2018, the partnership sustained a P33,000
loss before interest and salaries to partners.

By what amount should X’s capital account change?

a. P7,000 increase
b. P11,000 decrease
c. P35,000 decrease
d. P42,000 increase

XX and YY formed a partnership on January 2, 20x2 and agreed to share profits in the ratio of 90% and 10%,
respectively. XX contributed capital of P6,250. YY 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:
• Capital accounts are to be credited annually with interest at 5% of the beginning capital.
• YY is to be paid a salary of P250 a month.
• YY is to receive a bonus of 20% of net income calculated before deducting his salary and interest on both capital
accounts.
• Bonus, interest, and YY’s salary are to be considered as partnership expenses.

The partnership’s incomes statement for 2019 follows:

Revenues 24,112.50
Less: Expenses (including salaries, interest, and bonus) 12,245.00
Net income 11,687.50

6. What is YY’s 20x2 bonus?

a. P2,922.00
b. P3,000.00
c. P3,750.00
d. P3,934.50

7. How much is the total share of YY on the 20x2 partnership net income?
a. P7,084.50
b. P7,162.50
c. P7,918.75
d. P8,097.00

8. Derha, a senior partner in a law firm, has a 30% participation in the firm’s profit and losses. During 20x2, Derha
withdrew P130,000 against her capital but contributed property with a fair value of P25,000. Derha’s capital
decreased by P60,000 during 20x2. The net income of the partnership for 20x2 is
a. P150,000
b. P400,000
c. P350,000
d. P550,000

8. Linda and Mario created a partnership to own and operate a health-food store. The partnership agreement
provided that Linda receives an annual salary of P10,000 and Mario a salary of P5,000 to recognize their relative
time spent in operating the store. Remaining profit and losses were divided 60:40 to Linda and Mario,
respectively. Income of P13,000 for 20x1, the first year of operations, was allocated P8,800 to Linda and P4,200
to Mario. On January 1, 20x2, the partnership agreement was changed to reflect the fact that Mario could no
longer devote any time to the store’s operations. The new agreement allows Linda a salary of P18,000, and the
remaining profits and losses are divided equally. In 20x2, an error was discovered such that 20x1 reported income
was understated by P4,000. The partnership income of P25,000 for 20x2 included this P4,000 related to 20x1.

In the reported new income of P25,000 for the year 20x2, Linda would have
a. P21,900
b. P17,100
c. P0
d. P12,500
9. Derha, a senior partner in a law firm, has a 30% participation in the firm’s profit and losses. During 2018, Derha
withdrew P130,000 against her capital but contributed property with a fair value of P25,000. Derha’s capital
increased by P15,000 during 2018.

The net income of the partnership for 2018 is

a. P150,000
b. P400,000
c. P350,000
d. P550,000

10. Elmo, Fred, and Greg invest P40,000, P30,000, and P25,000 respectively, in a partnership on June 30, 20x1.
They agree to divide net income or loss as follows:
• Interest at 10% on beginning capital account balances.
• Salaries of P10,000, P8,000 and P6,000, respectively to Elmo, Fred, and Greg, respectively.
• Remaining net income or loss is divided equally.
• A minimum of P18,000 if income is guaranteed to Greg regardless of the result of operations.

If the net income for the year ended June 30, 20x2 before interest and salaries allowances to partners was
P44,000, the amount of the net income credited to Elmo is:
a. P21,875
b. P20,000
c. P18,334
d. P14,500

11. Peter and Ronald are partners. They have shared profits and losses 65/35 for a number of years. Peter has
indicated that he is going to reduce his involvement in the partnership, so the profit and loss is being modified to
45/55. At the date of the change in the profit and loss ratio, the partnership own vacant land with a market value
of P300,000 and a book value of P100,000. Peter and Ronald compile a list of assets with market value
differences. Two years after the change in the profit and loss ratio, the land is sold for P450,000. How much of the
gain is allocated to Ronald?
a. P157,500
b. P197,500
c. P227,500
d. P287,500

12. X, Y, and Z are partners with average capital balances during 20x2 of P120,000, P60,000, and P40,000,
respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P33,000
to X and P20,000 to Y, the residual profit or loss is divided equally. In 20x2, the partnership sustained a P33,000
loss before interest and salaries to partners.

By what amount should Y’s capital account change?

a. P7,000 increase
b. P9,000 decrease
c. P35,000 decrease
d. P42,000 increase

13. Left and Right are partners. Their capital accounts during 20x2 were as follows:

Left, Capital Right, Capital

8/23 P3,000 1/1 P15,000 3/5 P4,500 1/1 P25,000
4/3 4,000 7/6 3,500
10/31 3,000 10/7 2,500

Partnership net income is P25,000 for the year. The partnership agreement provides for the division of net income
as follows:
• Each partner in credited 10 percent interest on his or her average capital (rounded to the nearest month).
• Because of prior work experience, Left is entitled to an annual salary of P6,000 and Right is credited with
P4,000.
• Any remainder income or loss is to be allocated based on the beginning capital.

How much of the partnership net income for 20x2 should be assigned to Left and Right?
a. Left, P11,833.33; Right, P13,166.50
 b. Left, P9,375; Right, P15,625
c. Left, P13,194; Right, P11,806
d. Left, P12,500; Right, P12,500

14. Temporary withdrawals made by the partners is posted in ledger as

a. Partner’s drawing, debit
b. Partner’s drawing, credit
c. Partner’s capital, debit
d. Partner’s capital, credit

15. James has a bonus as part of his partner profit allocation. The bonus is based on the partnership’s net income.
James receives a bonus equal to 5 percent that the net income exceeds P150,000. If the net income in the
current year is P180,000, how much bonus does James receive?
a. P30,000
b. P9,000
c. P7,500
d. P1,500

16. Mr. A, a partner in ABC Co., is deciding whether to accept a salary of 8,000 or a salary of 5,000 plus a bonus of
10% of profit. The bonus shall be computed on the profit before salaries and bonus. Salaries of the other partners
amount to 20,000. What amount of profit would be necessary so that Mr. A would be indifferent between the
choices?
a. 30,000
b. 33,000
c. 48,000
d. 58,000

17. According to the Philippine Civil Code, in the absence of an agreement, profit and loss are divided by partners in
the ratio of:
a. Capital contribution
b. Equally
c. Time devoted by each of the partners
d. Goodwill

18. Which of the following is not a component of the formula used to distribute partnership profits to the partners?
a. Salary allocation to those partners working.
b. After all other allocation, the remainder decided according to the profit and loss sharing ratio.
c. Interest on the average capital investments.
d. Interest on loans to partners.

19. The Red and Black partnership agreement provides for Red to receive a 20% bonus on profits before the bonus.
Remaining profits and losses are divided between Red and Black in the ratio of 2:3, respectively. Which partner
has greater advantage when the partnership has a profit or when it has a loss?

Profit Loss
a. Red Black
b. Red Red
c. Black Red
d. Black Black

20. Statement 1: An industrial partner is exempt from sharing in partnership losses.

Statement 2: Salaries to partners and interest on partners’ capitals are accounted for as expenses of the
partnership.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

21. Isabelle, Jechelle, and Kristelle formed a partnership. The partnership agreement stipulates the following:
• Annual salary allowances of 100,000 for Isabelle and 20,000 for Jechelle.
• 10% interest on the beginning capital balances of Kristelle.
• The partners share in profit and losses on a 40:40:20 ratio.
 The partnership earned a profit of 500,000. Kristelle’s capital account had a beginning balance of 300,000. The
difference between the amounts received by Isabelle and Jechelle is ___________.
a. 160,000
b. 240,000
c. 80,000
d. 60,000

22. Rachelle and Sunshine formed a partnership. The partnership agreement stipulates the following:
• Annual salary allowance of 100,000 for Rachelle, the managing partner.
• 10% bonus to Rachelle after salaries but before deduction for the bonus.
• The partner share in profits and losses equally.

The share of Rachelle in the partnership profit during the period was 595,000 including a bonus of 90,000. How
much was the share of Sunshine?
a. 386,000
b. 398,000
c. 405,000
d. 504,000

23. Statement 1: Any salary allowances stipulated in the partnership agreement are considered only if profits is
sufficient to cover such allowances.
Statement 2: It is necessary to set a drawing account for the industrial partner for the purpose of recording his/her
share in the profits of the partnership.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

24. Partners Desiree and Deborah share profit and loss equally after each has been credited with annual salary
allowances of 160,000 and 140,000, respectively. Under this agreement, Desiree will benefit by 20,000 more than
Deborah in which of the following circumstances?
a. In all earnings or loss situations.
b. Only if the partnership does not incur a loss for the year.
c. Only if the partnership has earning of 300,000 or more for the year.
d. Only if the partnership has earnings of at least 20,000 for the year.

On January 1, 20x2, Tommy, Jason, and Kimberly formed a partnership with Tommy as an industrial partner.
Jason and Kimberly contributed cash of 400,000 and 600,000, respectively. They agree to divide profits in the
ratio of 2:4:3 to Tommy, Jason, and Kimberly, respectively. The operations of the partnership for the year 20x2
resulted in the loss of 240,000.

25. How much is the share of Jason and Kimberly in the partnership loss?
a. 137,143 and 102,857
b. 80,000 and 160,000
c. 96,000 and 144,000
d. 120,000 and 120,000

26. Using items in given no. 25, what would be the equity balance of Jason and Kimberly for the year 20x2?
a. 304,000 and 456,000
b. 262,857 and 497,143
c. 280,000 and 480,000
d. 340,000 and 440,000

27. Ciara and Diana formed a partnership. The partnership agreement stipulates the following:
• Annual salary allowances of 10,000 for Ciara and 40,000 for Diana.
• Bonus to Ciara of 10% of the profit after salaries but before bonus.
• The partners share profits on a 60:40 ratio.

During the period, the partnership incurred a loss of 20,000 before deduction of salaries. By what amount did
Diana’s capital account change?
a. Increased by 12,000.
 b. Decreased by 12,000.
c. Increased by 32,000.
d. Increased by 32,000.

28. The partnership agreement of Santos and Cruz provides for salary allowances of 45,000 to Santos and 35,000 to
Cruz, with the remaining profit or loss to be divided equally. During the year, Santos and Cruz each withdrew cash
equal to 80% of their salary allowances. If partnership profit is 100,000, Santos’ equity in the partnership would
______________.
a. Decrease more than Cruz.
b. Decrease the same as Cruz.
c. Increase more than Cruz.
d. Increase the same as Cruz.

29. Which of the following best describes the nature of allowances for salaries and interest in a partnership profit and
loss sharing agreement?
a. They are means of determining reasonable monthly withdrawals by each partner.
b. They are means of distributing profit in relation to services rendered and capital investment by partners.
c. They are treated as expenses of the business that should be deducted for revenue in determining profit.
d. They are amounts upon which each partner will have to pay personal income tax.

30. Irish and Ben operates on March 1, 20x3. On that date, Irish invested 1,500,000 cash and Ben invested land and
building with fair values of 800,000 and 1,000,000, respectively.

Ben also invested 600,000 cash on November 1, 20x3 to provide additional working capital for the partnership.
The partnership contract includes the following profit-sharing plan.
• Annual salaries: 180,000 (Irish); 240,000 (Ben)
• Annual interest on average capital balance: 10% (Irish); 10% (Ben)
• Remainder: 60% (Irish); 40% (Ben)

The annual salary was to be withdrawn by each partner in 12 equal monthly installments. During the fiscal year
ended February 28, 20x4, Irish and Ben had net sales of 5,000,000, cost of goods sold of 2,800,000 and total
selling and administrative expenses of 1,000,000. The partners’ salaries had been recorded as part of operating
expenses, and of 1,000,000. The partners’ salaries had been recorded as part of operating expenses, and each
partner made monthly cash drawings in accordance with the partnership contract. (Ignore income tax effects)

How much is the correct profit of the partnership for the fiscal year February 28, 20x4?
a. 1,200,000
b. 1,620,000
c. 1,250,000
d. 1,630,000