Test 1: Write the word CORRECT if the statement is true and the word WRONG if the statement is false. Print in CAPITAL letters why.
1. All partners, whether capitalist or industrialist, are to share on whatever partnership profit or losses.
2. Allowance for salaries and interest in a partnership agreement are methods of allocating profits and losses to the partners.
3. If the partners did not agree as how profits are to be divided, then such should be divided among the partners equally.
4. Bonus is allowed to partners only if there is a partnership profit, since bonus is based on profit
5. If the partnership agreement specifics a method for sharing profits, but not losses, then losses are shared based on capital balances.
6. Not all partnership are subject to income tax, even though the income of the business is large in amount.
1. Profit is represented by a debit balance in the Income Summary account after closing into all the nominal accounts.
8. The drawing account of a partner may have a debit or a credit balance.
9. The percentage interest in a partnership is always the same as the profit-sharing ratio.
10. Unless otherwise agreed, allowance for salaries and interest are allowed to partners whether profit is sufficient or insufficient.
Test 2: Problem Solving:
Problem: Corvette and Cougar, a partner if the Cars Co. Corvette has a twenty-five per cent participation in the partnership's operating results. During the year 2013, Corvette transferred equipment with a fair value of P25,000 to the partnership but he made regular monthly cash drawings of P1,250 for personal use. On December 31, 2013, Corvette's capital balance increased by P20,000.
1. How much would be the net income of the partnership?
Problem: Nelson, Rico and Dennis are partners in an accounting firm. Their capital account balances at year-end were 180,000, P220,000 and PI00,000, respectively. They share profit on a 4:4:2 ratio, after considering the following:
- Dennis is to receive a bonus of 10% of profit after bonus.
- Interest of 10% shall be paid on that portion of a partner's capital in excess of P200,000.
- Salary of P20,000 and P24,000 shall be paid to partners Nelson and Dennis, respectively.
2. Assuming a profit of P110,000 for the year, compute of the total share of Dennis.
Problem: Under their partnership agreement, Penni° is to be allowed a bonus of 20% of net income after bonus and the remainder is to be divided as follows: 35% each to Jinggoy and Uma, and 30% to Franklin. If the partnership's net income is P318,000,
3. How much would be the share ofJinggoy in the income of the partnership?
Problem: Mr. Zoom and his very close friend, Boom, formed a partnership on January I, 2015, with Zoom contributing P32,000 in cash and Boom contributing equipment, with book value of P12,800 and fair value of P9,600, and inventory items, with book value of P4,800 and fair value of P6,400. During 2015, Boom made additional investments of P3,200 on April I and P3,200 on June 1 and withdrew P8,000 on September I. Zoom had no additional investments or withdrawals during the year.
4. What was the average capital balance of Boom during 2015?
Problem: Indoy has a twenty per cent participation in the partnership's operating results. today's capital account had a net increase of P60,000 during the year 2015. During 2015, Indoy withdrew P130,000 and contributed property valued at P 25,000 to the partnership.
5. How much is the profit of the partnership for year 2015?
Problem: Abreu, Ponti and Olay share profits and losses in the ratio of 2:3:5, respectively. Their partnership realized a profit of P1,800,000 during the year. Abreu, with a beginning capital balance of P1,000,000 withdrew P200,000 during the year.
6. How much is Abreu's ending capital balance?
Problem: Mickey and Minnie share profits and losses in the ratio of 1:2. Mickey receives a monthly salary of PI50,000. If Mickey's capital balance P2,500,000 at the beginning of the year and P2,000000 at the end of the year, and annual partnership profit after salaries is P1,200,000.
7. Compute the amount withdrawn by Mickey during the year.