lOMoARcPSD|11702276 447210207-Partnership-Continuation Accountancy (Manuel S. Enverga University Foundation) StuDocu is not sponsored or endorsed by any college or university Downloaded by ksoo ki (koloristaofficial@gmail.com) lOMoARcPSD|11702276 Partnership Operations: 18. JJ and KK are partners who share profits and losses in the ratio of 60%: 40%, respectively. JJ’s salary is P60,000 and P30,000 for KK. The partners are also paid interest on their average capital balances. In 20x5, JJ received P30,000 of interest and KK, P12,000. The profit and loss allocation is determined after deductions for the salary and interest payments. If KK’s share in the residual income (income after deducting salaries and interest) was P60,000 in 20x5, what was the total partnership income? Answer: C. P282,000 19. The Partnership has the following accounting amounts: (1) Sales = P 70,000 (2) Cost of Goods Sold = P40,000 (3) Operating Expenses = P10,000 (4) Salary allocations to partners = P13,000 (5) Interest Paid to banks = P2,000 (6) Partners’ withdrawals = P8,000 The partnership net income (loss) is: Answer: B. P 18,000 20. Lancelot is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income after salary and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be P100,000. What amount of income would be necessary so that Lancelot would consider the choices to be equal? Answer: B. P 290,000 21. 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 ratio is being modified to 45/55. At the date of the change in the profit and loss ratio, the partnership owns 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 and book value differences. Two years after the change in the profit and loss ratios, the land is sold for P450,000. How much of the gain is allocated to Peter? Answer: B. P 197,500 22. Jennifer and Robert are partners who are changing their profit and loss ratios from 60/40 to 45/55. At the date of the change, the partners choose to revalue assets with market value different from book value. One asset revalued is land with a book value of P50,000 and a market value of P120,000. Two years after the profit and loss ratio is changed, the land is sold for P200,000. What is the amount of change to Robert’s capital account at the date the land is sold? Answer: B. 44,000 Downloaded by ksoo ki (koloristaofficial@gmail.com) lOMoARcPSD|11702276 23. Shawn is a managing partner in a local business. Part of his profit allocation is a bonus based on the store’s operating income in excess of P200,000 after deducting the bonus. If operating income for the year is P250,000, what is Shawn’s bonus (rounded to the nearest peso)? Answer: A. P 3,703 24. 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? Answer: D. P 1,500 25. Cheryl is the manager of a local store. She is also a partner in the company and she receives a bonus as part of the profit and loss allocation. Cheryl’s bonus is based on the increase in revenues recorded during the period. The bonus arrangement is that Cheryl receives 1 percent of net income for every full percentage point growth for revenues in excess of a 5 percent revenue growth. During the most recent period, revenues grew from P500,000 to P540,000 and net income grew from P98,000 to P120,000. How much bonus does Cheryl receive for this period? Answer: C. P 3,600 26. Nick, Joe and Mike are partners. The company has P150,000 net income for the period. How is this income divided to the partners if the following profit and loss allocation process is followed? Nick Joe Mike Weighted average capital P 200,000 P 350,000 P 180,000 Salary 25,000 15,000 35,000 Bonus .1 (NI – P100,000) Residual profit/loss ratios 25 .45 .30 Return on invested capital 9% Answer: D. Nick Joe Mike P44,075 P 48,435 P 57,490 27. Cab and Jo are considering forming a partnership whereby profits will be allocated through the use of salaries and bonuses. Bonuses will be 10% of net income after total salaries and bonuses. Cab will receive a salary of P30,000 and a bonus. Jo has the option of receiving a salary of P40,000 and a 10% bonus or simply receiving a salary of P52,000. Both partners will receive the same amount of bonus. Determine the level of net income that would be necessary so that Jo would be indifferent to the profit sharing option selected. Answer: D. 334,000 Downloaded by ksoo ki (koloristaofficial@gmail.com) lOMoARcPSD|11702276 28. The partnership agreement of XX, YY & ZZ provides for the year-end allocation of net income in the following order: First, XX is to receive 10 % of net income up to P200,000 and 20% over P200,000. Second, YY and ZZ each are to receive 5% of the remaining income over P300,000. The balance of income is to be allocated equally among the three partners. The partnership’s 20x5 net income was P500,000 before any allocations to partners. What amount should be allocated to XX? Answer: B. P 216,000 29. The partnership agreement of RR and SS provides that interest at 10% per year is to be credited to each partner om the basis of weighted-average capital balances. A summary of the capital account of SS for the year ended December 31, 20x5, is as follows: Balance, January 1 ……………………………………………………………… P 420,000 Additional investment, July 1 ………………………………………………….. 120,000 Withdrawal, August 1 ………………………………………………………….. ( 45,000) Balance, December 31 …………………………………………………………. 495,000 What amount of interest should be credited to SS’s capital account for 20x5? Answer: C. P 46,125 30. AA, BB and CC are partners with average capital balances during 20x5 of P360,000, P180,000 and P120,000, respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P90,000 to AA and P60,000 to CC the residual profit or loss is divided equally. In 20x5 the partnership sustained a P99,000 loss before interest and salaries to partners. By what amount should AA’s capital account change? Answer: A. P 21,000 increase Downloaded by ksoo ki (koloristaofficial@gmail.com)