PARTNERSHIP OPERATIONS
Partnership Net Income
Profit & loss statement given
1. Albert Perez, a partner in the AP Partnership, has a 30% participation in partnership profits and
losses. Perez's capital account has a net decrease of P60,000 during the calendar year 2023.
During 2023, Perez withdrew PI30,000 (charged against his capital account) and contributed
property valued at P25,000 to the partnership. What was the net income of the AP Partnership for
2023?
a. P150,000 c. P350,000
b. P233,333 d. P550,000
2. RR, a partner in the RD partnership, is entitled to 40% of the profits and losses. During 2023,
RR contributed land to the partnership that cost her P50,000, but had a fair vlaue of P60,000. Also
during 2013, RR had drawings of P80,000. The balance of RR's capital accounts was P120,000 at
the beginning of the year and PI 50,000 at the end of the year.
What is the partnership's comprehensive income (loss) for 2023.
a. P(7 5,000) c. P150,000
b. P(50,000) d. P125,000
Partner's required share in income given
3. CC, PP, and AA, accountants, agree to form a partnership and to share profits in the ratio of 5:3:2.
They also agreed that AA is to be allowed a salary of P28,000, and that PP is to be guaranteed
P21,000 as his share of the profits. During the first year of operation, income from fees are
P180,000, while expenses total P96,000. What amount of net income should be credited to each
partner's capital account?
a. CC, P28,000, PP, P16,800, AA, P11,200
b. CC, P25,000, PP.P21.000, AA, P38,000
c. CC, P24,000, PP, P22,000, AA, P38,000
d. CC, P25.000, PP, P21.000, AA, P39,000
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jipb accounting in partnership2021
PARTNERSHIP OPERATIONS
SOLUTION
1 . (a)
Investment
Withdrawals
Decrease in capital
Net decrease in capital
Profit share (30%)
Net income (45,000 +
P 25,000
( 130,000)
105,000
60,000
P 45,000
P150,000
2.
Capital balance, beginning
Additional investment (land at fair value)
Profit share (squeeze)
Drawings
Capital balance, end
Net profit (P50,000 / 40%)
P120,000
60,000
50,000
( 80,000)
P150,000
P125,000
3. (c)
Salary
Balance (P84.000-P28,000), .5:3:2
Additional profit to PP (P21,000 - PI 6,800)
CC
PP
P28.000
(3,000)
PI6,800
4,200
AA
P28.000
11,200
(1,200)
Total
P28,000
56,000
P25,000 P21,000 P38.000 P84,000* (b)
Net Income would be:
Fees
P18,000
Less: Expenses
96,000
P 84,000
It should be noted that the additional profit given to PP actually came from CC and AA based on
their respective revised P&L ratio (5:2!. The P4,200, additional profit should not be added to total
net income because by doing so, it would be tantamount to distorting the net income of P84,000.
On the other hand, assuming the P4.200 would be added to net income of P84.000, the total net
income will now be P88.200, but an adjustments of P4.200 should be reflected to make it P84.000,
and such adjustments will be shared accordingly by CC and AA (5:2!. Mathematically, the final
results remain the same
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jipb accounting in partnership2021