Chapter 2

Partnership – Part 2

PROBLEM 2-1: TRUE OR FALSE

6. TRUE (20 x 10%) + (20 x
1. FALSE 90% x 50%) = 11
2. TRUE 7. FALSE (20 X 50%) = 10
8. FALSE [50 + (100 – 50 –
3. TRUE 30) x 50%]
4. TRUE 9. FALSE
5. FALSE (10 – 2) x 50% = 4 10. TRUE

PROBLEM 2-2: THEORY & COMPUTATIONAL

1. C

2. C

3. D

4. D

5. D

6. Solutions:

Case #1:
A B C Total
100,00
Amount being allocated
0
Allocation:
12,00
1. Salaries
0 8,000 20,000
2. Bonus (100K - 20K) x 10% 8,000 8,000
3. Interest on cap.
(100K x 10%);(60K x 10%);(120K x 10,00 12,00
10%) 0 6,000 0 28,000
4. Allocation of remainder:
(100K - 20K - 8K - 28K) = 44K;
(44K x 40%); (44K x 30%); (44K x 17,60 13,20
30%) 0 13,200 0 44,000
47,60 19,20 33,20 100,00
As allocated
0 0 0 0

1
Case #2:
A B C Total
Amount being allocated 10,000
Allocation:
1. Salaries 12,000 8,000 20,000
2. Bonus (N/A) - -
2. Interest on cap.
(100K x 10%);(60K x 10%);(120K x 12,00
10%) 10,000 6,000 0 28,000
3. Allocation of remainder
(10K - 20K - 28K) = -38K
(-38K x 40%); (-38K x 30%); (-38K x (15,200 (38,000
30%) ) (11,400) (11,400) )
As allocated 6,800 (5,400) 8,600 10,000

Case #3:
A B C Total
(20,000
Amount being allocated
)
Allocation:
1. Salaries 12,000 8,000 20,000
2. Bonus (N/A) - -
2. Interest on cap.
(100K x 10%);(60K x 10%);(120K x 12,00
10%) 10,000 6,000 0 28,000
3. Allocation of remainder
(-20K - 20K - 28K) = -68K
(-68K x 40%); (-68K x 30%); (-68K x (27,200 (68,000
30%) ) (20,400) (20,400) )
(5,200 (20,00
As allocated
) (14,400) (400) 0)

7. Solution:
Balance, Jan. 1, 20x1 12/12
252,000 252,000
Additional investment, July
6/12
1 72,000 36,000
Withdrawal, August 1 5/12

2
 (27,000) (11,250)
Weighted average capital 276,750
Multiply by: 10%
Interest 27,675

3
PROBLEM 2-3: EXERCISES – COMPUTATIONAL

1. Solutions:

Case #1:
A B C Total
100,00
Amount being allocated
0
Allocation:
10,00
1. Bonus (10% x 100,000)
0 10,000
2. Interest on cap.
(80K x 6%); (50K x 6%); (30K x
6%) 4,800 3,000 1,800 9,600
3. Allocation of remainder 26,80 26,80 26,80
(100K - 10K - 9.6K) = 80.4K ÷ 3 0 0 0 80,400
41,60 29,80 28,60 100,00
As allocated
0 0 0 0

Case #2:
A B C Total
(20,000
Amount being allocated
)
Allocation:
1. Bonus (none) - -
2. Interest on cap.
(80K x 6%); (50K x 6%); (30K x 6%) 4,800 3,000 1,800 9,600
3. Allocation of remainder (9,867 (9,867 (9,867 (29,600
(-20K - 9.6K) = -29.6K ÷ 3 ) ) ) )
(5,067 (6,867 (8,067 (20,000
As allocated
) ) ) )

2. Solution:

Balance, Mar. 1, 20x1 50,000 10/12 41,666.67

Additional investment, June 1 20,000 7/12 11,666.67

Withdrawal, Sept. 1 (15K -
10K) (5,000) 4/12 (1,666.67)
Weighted average capital 51,667
Multiply by: 12%

Interest on capital 6,200

4
3. Solutions:
Case #1:

Partner A:
12/1
Balance, Jan. 1, 20x1 120,000 2 120,000
Withdrawal, May 1 (20,000) 8/12 (13,333)
Additional investment, Aug. 1 10,000 5/12 4,167
Withdrawal, Oct. 1 (10,000) 3/12 (2,500)
Weighted Ave. Capital 108,333

Partner B:
12/1
Balance, Jan. 1, 20x1 80,000 2 80,000
Withdrawal, May 1 (10,000) 8/12 (6,667)
Additional investment, July
1 20,000 6/12 10,000
Withdrawal, Oct. 1 (5,000) 3/12 (1,250)
Weighted Ave. Capital 82,083

Wtd. Ave.
Partners Cap.
A 108,333
B 82,083
Total 190,417

A B Total
Amount being allocated 240,000
Allocation:
(240K x 108,333/190,417); 136,54
103,457 240,000
(240K x 82,083/190,417) 3
136,54
As allocated 103,457 240,000
3

Case #2:
A B Total
Amount being allocated 240,000
Allocation:
1. Interest on cap. (see computations
20,000 17,000 37,000
below)
2. Allocation of remainder 101,50
101,500 203,000
(240K - 37K) = 203K ÷ 2 0
As allocated 121,50 118,50 240,000

5
 0 0

Partner A Partner B
Balance, Jan. 1, 20x1 120,000 80,000
Withdrawal, May 1 (20,000) (10,000)
Additional investment, July 1 20,000
Additional investment, Aug. 1 10,000
Withdrawal, Oct. 1 (10,000) (5,000)
Ending balances 100,000 85,000
Multiply by: 0 0
Interest on ending balance 20,000 17,000

4. Solutions:

Case #1:
A B Total
Amount being allocated 480,000
Allocation:
1. Salary 60,000 60,000 120,000
2. Bonus (see computation below) 60,000 60,000
3. Allocation of remainder 150,00 150,00
(480K – 120K - 60K) = 300K ÷ 2 0 0 300,000
270,00 210,00
As allocated
0 0 480,000

The bonus is computed as follows:

Profit before salaries and before bonus 480,000

Salaries (60K x 2) (120,000)

Profit after salaries but before bonus 360,000
P
B = P -
1 + Br
Where: B = bonus
P = profit before bonus and tax but after salaries
Br = bonus rate or bonus percentage

360,000
B = 360,000 -
1 + 20%
B = 360,000 - 300,000
B = 60,000

Case #2:

6
 A B Total
480,000(a
Amount being allocated )

Allocation:
1. Salary 60,000 60,000 120,000
2. Bonus 60,000(b) 60,000
3. Allocation of remainder 150,00
(480K – 120K - 60K) = 300K ÷ 2 150,000 0 300,000
270,00 210,00
As allocated
0 0 360,000

(a)
Profit before salaries and bonus is computed as follows:
Profit after salaries but before bonus 360,000
Salaries (60K x 2) 120,000

Profit before salaries and bonus 480,000

(b)
The bonus is computed as follows:
P
B = P -
1 + Br
Where: B = bonus
P = profit before bonus and tax but after salaries
Br = bonus rate or bonus percentage

360,000
B = 360,000(c) -
1 + 20%
B = 360,000 - 300,000
B = 60,000
(c)
This is amount of profit given in the problem.

Case #3:
A B Total
480,000(a
Amount being allocated )

Allocation:
1. Salary 60,000 60,000 120,000
2. Bonus 60,000(b) 60,000
3. Allocation of remainder 150,00
(480K – 120K - 60K) = 300K ÷ 2 150,000 0 300,000
270,00 210,00
As allocated
0 0 360,000

7
 (squeeze
(a)
Profit before salaries and bonus 480,000 )

Salaries (60K x 2) (120,000)

Bonus (see computation below) (60,000)

Profit after salaries and bonus 300,000 (start)

(b)
The bonus is computed as follows:
 The problem states that the bonus is computed based on “Profit after
salaries and after bonus.” The “Profit after salaries and after bonus” is
actually the ₱300,000 amount given in the problem. Thus, to compute for
the bonus, the ₱300,000 amount is simply multiplied by the 20% bonus
percentage, i.e., (300,000 x 20%) = ₱60,000.

5. Answer: 0