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ACT130: ACCOUNTING FOR SPECIAL TRANSACTIONS PRELIM EXAM 2024/2025|VERIFIED 100%
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ACT130: ACCOUNTING FOR SPECIAL TRANSACTIONS PRELIM EXAM 2024/2025|VERIFIED 100%
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ACT130: ACCOUNTING FOR SPECIAL TRANSACTIONSPRELIM EXAM 2024/2025|VERIFIED 100%
On January 1, 2018, A, B, and C formed ABC Partnership with original capital contribution of P300,000.
P500,000, and P200,000, respectively. A is appointed as managing partner.
During 2018, A, B, and C made additional investment of P500,000, P200,000 and P300,000, respectively. At
the end of 2018, A, B, and C made drawings of P200,000, P100,000, and P400,000, respectively. At the end of
2018, the capital balance of C is reported at P320,000. The profit or loss agreement of the partners are as
follows:
10% interest on original capital contribution of the partners
Quarterly salary of P40,000 and P10,000 for A and B, respectively.
Bonus to A equivalent to 20% of Net Income after interest and salary to all partners
Remainder is to be distributed equally among the partners.
1. What is the profit or loss of the partnership for the year ended December 31, 2018?
ANSWER: 1,050,000
2. What is the share of A in the partnership profit or loss for 2018?
ANSWER: 540,000
3. What is the share of B in the partnership profit or loss for 2018?
ANSWER: 290,000
Solution:
Ending Balance 320,000 A B C TOTAL
Drawings 400,000 Salary 160,000 40,000 200,000
Orig. Investment (200,000) Interest 30,000 50,000 20,000 100,000
Add'l Investment (300,000) Bonus 15,000 150,000
C's Share in Profit 220,000 Remainder 200,000 200,000 200,000 600,000
TOTAL 540,000 290,000 220,000 1,050,000
C's share in profit for the year 2018 220,000
Interest of C [200000 x 10%] (20,000)
C's share in remaining share 200,000
Number of partners x 3
remaining profit after interest, salary and bonus 600,000
divided by: / 80%
Net profit after interest, salary but before bonus 750,000
add: Total Interest and Salary [200000 + 100000] 300,000
1,050,000
4. On January 1, 2020, K and J formed KJ Partnership and the articles of co-partnership provides the
profit or loss shall be distributed accordingly:
10% interest on average capital balance
P50,000 and P100,000 quarterly salary for K and J, respectively.
The remainder shall be distributed in the ratio of 3:2 for K and J, respectively.
The following transactions regarding the capital balances of the partners for year 2020 are provided:
Year 2020 K, Capital J, Capital
Jan. 1 investment P1,000,000 P500,000
Mar. 31 investment 100,000
, July 1 withdrawal 200,000
Sept. 30 withdrawal 200,000
Oct. 1 investment 700,000
The chief accountant of the partnership reported net income of P1,000,000 for year 2020.
What is the capital balance of K on December 31, 2020?
ANSWER: 1,951,5000
Solution:
Compute for Average capital of K Compute for average capital of J
Date Capital No. of Date Capital No. of
Balance months Balance months
unchanged unchanged
1/1 100,000 x 6 6,000,000 1/1 500,000 x 3 1,500,000
7/1 800,000 x 3 2,400,000 4/1 600,000 x 6 3,600,000
10/1 1,500,000 x 3 45,000,000 10/1 400,000 x 3 1,200,000
12 12,900,000 12 6,300,000
Average Capital: 12,900,000/12 = 1,075,000 Average Capital: 6,300,000/12= 525,000
K’s Interest: 1,075,000 x 10% = 107,500 J’s Interest: 525,000 x 10% = 52,500
Amount to be Allocated: 1,000,000
K’s Capital Balance
K J
Initial Investment 1,000,000
Salary 200,000 400,000 600,000
Drawings (200,000)
Interest 107,500 52,500 160,000
Add’l Investment 700,000
Remainder (3:2) 144,000 96,000 240,000
Capital Balance 1,500,000
Share of partners
451,500 548,500 1,000,000 Share of K in Net Income 451,500
in Net Income
K’s Capital Balance on 12/31/20 1,951,500
5. On July 1, 2020, K and J formed a partnership with initial investment of P1M and P2M, respectively. K
is appointed as the managing partner.
The articles of co-partnership provide that profit and loss shall be distributed accordingly:
30% interest on the original capital contribution.
Monthly salary of P20,000 and P10,000, respectively for K and J.
K shall be entitled to bonus equivalent to 20% of net income after salary, interest and bonus.
The remainder shall be distributed in the ratio of 3:2, respectively.
The partnership reported a P750,000 net income
What is the share in net income of K for the year ended December 31, 2020?
ANSWER: 350,000
Solution:
Compute for Interest:
K’s interest = 1,000,000 x 30% x 6/12 = 150,000
J’s Interest = 2,000,000 x 30% x 6/12 = 300,000
Compute for salary:
K’s Salary = 20,000 x 6 = 120,000
J’s Salary = 10,000 x 6 = 60,000
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