1.1.2.a Learning Activity
The AA, BB and CC Partnership was formed on January 2, 2019. The original cash investments
were as follows:
AA ………………………………………………………………….. P 48,000
BB …………………………………………………………………..
72,000
CC ………………………………………………………………….. 108,000
According to the general partnership contract the partners were to be remunerated as follows:
1. Salaries of P7,200 for AA, P6,000 for BB, and P6,800 for CC.
2. Interest at 12% on the average capital account balances during the year.
3. Remainder divided 40% to AA, 30% to BB, and 30% for CC.
Income before partners’ salaries for the year ended December 31, 2019, was P46,040. AA
invested an additional P12,000, in the partnership on July 1; CC withdrew P18,000 from the
partnership on October 1, and, as authorized by the partnership contract, AA, BB, and CC each
withdrew P375 monthly against their shares of net income for the year.
Required: Prepare the schedule of distribution of partnership profit or loss.
SOLUTION:
CAPITAL BALANCE OF PARTNERS
Capital 01/02/19
Add: Additional Investment
Net Income
Total
Less: Withdrawals
Capital 12/31/19
Withdrawals:
a. 375*12 = 4,500
b. 18,000 + (375*12) = 22,500
AA
BB
CC
P 48,000
P 72,000 P 108,000
12,000 13,080
14,190
18,770
73,080
4,500a
P 68,580
86,190
4,500a
P 81,690
126,770
22,500b
P 104,270
TOTAL
P 228,000
12,000
46,040
286,040
31,500
P 254,540
DISTRIBUTION OF PROFIT/LOSS
Salaries
Interest on Average
Capital
AA (54000*12%)
BB (72000*12%)
CC (103500*12%)
Balance
Net Income(Loss)
AA
7,200
BB
6,000
CC
6,800
TOTAL
20,000
(450)
14,190
12,420
(450)
18,770
6,480
8,640
12,420
(1,500)
46,040
48,000 12/12
48,000
12,000 6/12
6,000
54,000
72,000 12/12
72,000
108,000 12/12
108,000
(18,000) 3/12
(4,500)
103,500
6,480
8,640
(600)
13,080
COMPUTATION AVERAGE CAPITAL:
AA
01-Jan19 Beginning Balance
01-Jul- Additional
19 investment
BB
01-Jan19 Beginning Balance
CC
01-Jan19 Beginning Balance
01-Oct19 Withdrawal