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The partnership of DD and BB was formed on March 1, 20x5 with DD contributing P30,000 cash and BB contributing P10,000 cash and equipment worth P20,000. Throughout 20x5, various capital contributions and withdrawals were made. At the end of the year, the partnership had net income of P24,000 that was allocated based on salary allowances of P8,000 for DD and P10,000 for BB, interest on average capital balances of P2,800 for DD and P3,600 for BB, and the remaining P400 split equally.

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416 views2 pages

33

The partnership of DD and BB was formed on March 1, 20x5 with DD contributing P30,000 cash and BB contributing P10,000 cash and equipment worth P20,000. Throughout 20x5, various capital contributions and withdrawals were made. At the end of the year, the partnership had net income of P24,000 that was allocated based on salary allowances of P8,000 for DD and P10,000 for BB, interest on average capital balances of P2,800 for DD and P3,600 for BB, and the remaining P400 split equally.

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HappyPurple
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33.

The partnership of DD and BB was formed and commenced operations on

March 1, 20x5, with DD Contributing P30,000 cash and BB investing cash of

P10,000 and equipment with an agreed upon valuation of P20,000. On July 20x5,

BB invested an additional P10,000 in the partnership, DD made a capital

withdrawal of P4,000 on May 2, 20x5 but reinvested the P4,000 on October 1,

20x5. During 20x5, DD withdrew P800 per month and BB, the managing partner,

withdrew P1,000 per month. These drawings were charged to salary expense. A

pre-closing trial balance taken at December 31, 20x5 is as follows: Debit Credit .

Cash ...………………………………… P 9,000 Receivable – net ..…………………… 15,000

Equipment – net ...…………………… 50,000 Other

assets ................................................. 19,000 Liabilities .…………………………….. P

17,000 DD, capital ………………………………… 30,000 BB,

capital ................................................... 40,000 Service revenue .…………………………

50,000 Supplies expense ......................................... 17,000 Utilities expense .

……………………………… 4,000 Salaries to partners...................................... 18,000

Other miscellaneous expenses ………… 5,000 . Total ……………………………………….

P137,000 P137,000 Compute for the share of DD and BB in the partnership net

income assuming monthly salary allowances P800 and P1,000 for DD and BB,

respectively; interest allowance at a 12% annual rate on average capital balances


and remaining profits allocated equally. a. DD, P 10,520; BB, P 13,480 c. DD, P

10,800; BB, P 13,200 b. DD, P 12,000; BB, P 12,000 d. DD, P 10,600; BB. P 13,400

(Adapted) Answer: (d) DD BB Total Salary Allowances P8,000 P10,000 P18,000

Interest on Average Capital 2,800 3,600 6,400 Balance (Equally) (200) (200) (400)

P10,600 P13,400 P24,000 (d) Net Income of P24,000 would be computed as

follows: Service Revenue…………………………………………… P50,000 Less: Expenses:

Supplies……………………………………………… P17,000

Utilities……………………………………………….. 4,000 Other Miscellaneous

expenses………………… 5,000 26,000 Net Income…………………………………………………

P24,000 *DD: P800 x 10 = P8,000 *BB: P1,000 x 10 = P10,000 ***Interest on

Average Capital: DD: P30,000 x 2 = P60,000 P26,000 x 5 = P130,000 P30,000 x 3 =

P90,000 P280,000 10-month average capital: P280,000/10 = P28,000 x 12% x

10/12 = P2,800 Annual average capital: P280,000/12 = P23,333x 12% = P2,800 BB:

P30,000 x 4 = P120,000 P40,000 x 6 = P240,000 P360,000 10-month average

capital: P360,000/10 = P36,000 x 12% x 10/12 = P3,600 Annual average capital:

P36,000/12 = P30,000x 12% = P3,600

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