ACCOUNTING 2

On January 1, 2023, John and Martha partnered and opened JM Merchandise by contributing cash of P400,000 and P300,000, respectively. During the year, John permanently withdrew P10,000 on May 1 and P50,000 on October 31 but made an additional investment of P160,000 on July 1. Meanwhile, Martha permanently withdrew P50,000 on July 1 but made series of additional investments on April 1 and September 30 amounting to P200,000 and P150,000, respectively. At the end of the year, the entity earned an income of P150,000. Assuming the partners agreed to share in the profit on the basis of beginning capital ratio, how much was allocated to John?

On January 1, 2023, John and Martha partnered and opened JM Merchandise by contributing cash of P400,000 and P300,000, respectively. During the year, John permanently withdrew P10,000 on May 1 and P50,000 on October 31 but made an additional investment of P160,000 on July 1. Meanwhile, Martha permanently withdrew P50,000 on July 1 but made series of additional investments on April 1 and September 30 amounting to P200,000 and P150,000, respectively. At the end of the year, the entity earned an income of P150,000. Assuming, they agreed to share profit on the basis of weighted-average, the capital balance of John at the end of the period will increase by his share in the profits amounting to ____.

Mr. A and Ms. B formed a partnership. Mr. A

contributed P1,000,000 cash, while Ms. B will

contribute her services. Mr. A is a capitalist partner

while Ms. B is an industrial partner. In the event that the partnership incur losses, Mr A will not share in the losses.

• TRUE

• FALSE

Which of the following would be least likely to be

used as a means of allocating profits among the

partners who are active in the management of the

partnership?

• Salary to partners

• Bonus to partners

• Interest on average capital balances

Which of the following statements is true

concerning the treatment of salaries in partnership

accounting?

• Partners salaries may be used to allocate profits and losses; they are not considered expenses of the partnership

• Partners salaries are considered expenses of the partnership which shall be deducted in the revenue.

• Normally, partners salaries are given to capitalist partners.

According to the Philippine Civil Code, in the

absence of a stipulation on the sharing of profits or

losses, partnership profits and losses shall be

shared by the partners

• equally.

• in proportion to what the partners may have contributed but the industrial partner shall not be liable to losses.

• in an arbitrary ratio such as 2:1.

You and I are partners. We share in profits equally.

Because I am the managing partner, I am entitled

to a 20% bonus computed on profit before

deducting the bonus.

If our partnership earns profit of P1,000,000 (before

deducting my bonus), your share would be

P500,000

• TRUE

• FALSE

Answer explanation

Because we have to consider first the bonus of P200,000 allocated to me before dividing the remaining P800,000 equally. Hence, your share would be P400,000.

To compensate for the difference in their capital contributions, partners are allowed this item.

• salaries to partners

• interest to partners

• bonus to partners

Basis for the computation of incentive given to managing partner

• net income

• salary

• capital balance

• original contributions made by the partners

The account debited for partners' permanent withdrawals of capital

• Drawing Account

• Cash

• Capital Account

• Loan to Partner