Solution Chapter 2 Dayag
Solution Chapter 2 Dayag
Problem I
1. Beginning Capital.
Income summary
X, drawing.
Y, drawing.
345,600
144,000
201,600
P
360,000
504,00
0
P
864,000
P
144,000
201,60
0
P
345,600
2. Ending Capital.
Income summary
X, drawing.
Y, drawing.
345,600
153,600
192,000
P
432,000
540,00
0
P
972,000
P
153,600
192,00
0
P
345,600
4,320
4,320
X:
Capital
balance
P360,000
432,000
No. of Mos.
Unchanged
3
P 4,320
P1,080,000
1/1/x4:
4/1/x4:
3,888,000
12
P4,968,000
P 414,000
Average
Y:
Capital
balance
P504,000
No. of Mos.
Unchanged
2
468,000
540,000
P
1,008,000
3,744,000
1/1/x4:
3/1/x4:
1,080,00
0
P5,832,000
P 486,000
P 900,000
11/1/x4:
12
Average
Total
P
113,760
P
113,760
Y
P
4,320
227,52
0
P
231,840
Total
P
4,320
341,280
P345,600
345,600
113,760
231,840
Problem II
1. A bonus of 20% of net income before the bonus is deducted, the bonus would be
computed as follows:
Let B
B
B
B
=
=
=
=
Bonus
20% of Net income
20% of P504,000
P100,800
2. A bonus of 20% of net income after deduction of the bonus, the bonus would be
computed as follows:
Let B
= Bonus
= 20% of Net income after Bonus
B
= 20% (P504,000 B)
B
B
1.20 B
B
1.
= P100,800 - .20B
= P100,800
= P84,000
Problem III
Bonus is based on net income before bonus, salaries and interest
The schedule showing the allocation of net income is presented as follows:
A
Bonus.
Salaries
Interest.
Balance (2;1).
Total
2.
P
100,800
48,000
14,400
172,80
0
P336,00
0
Total
P 100,800
P 72,000
9,600
86,40
0
P168,00
0
120,000
24,000
259,20
0
P504,000
Bonus is based on net income after bonus but before salaries and interest
The schedule showing the allocation of net income is presented as follows:
Bonus.
Salaries
Interest.
Balance (2;1).
Total
A
P 84,000
48,000
14,400
184,00
0
P330,40
0
B
P 72,000
9,600
92,00
0
P173,60
0
Total
P 84,000
120,000
24,000
276,00
0
P504,000
3. Bonus is based on net income after bonus and salaries but before interest:
Let B
B
= 20% (P504,000 B S)
B
B
B
B
1.20 B
B
=
=
=
=
=
Proof:
Net income before bonus, salaries and interests
Less: Bonus
Salaries0
Net income after bonus, salaries before interests
Multiplied by: Bonus rate.
Bonus
P504,000
64,000
120,000
P320,000
20%
P 64,000
A
P 64,000
48,000
14,400
197,33
3
P323,73
3
B
P 72,000
9,600
98,66
7
P180,26
7
Total
P 64,000
120,000
24,000
296,00
0
P504,000
= 20% (P504,000 B S - I)
B
B
B
B
1.20 B
B
=
=
=
=
=
Proof:
Net income before bonus, salaries and interests
Less: Bonus
Salaries
Interest..
Net income after bonus, salaries before interests
Multiplied by: Bonus rate.
Bonus
P504,000
60,000
120,000
24,000
P300,000
20%
P 60,000
A
P 60,000
48,000
14,400
200,00
0
P322,40
0
B
P 72,000
9,600
100,00
0
P181,60
0
Total
P 60,000
120,000
24,000
300,00
0
P504,000
5. Bonus is based on net income after salaries but before bonus and interest:
Let B
B
= 20% (P504,000 S)
B
B
B
B
B
= 20% (P504,000 P24,000I
B
B
B
= 20% (P480,000)
= P96,000
= Bonus;
= 20% (P504,000
T)
= P100,800 - .20T
= Income tax
= 35% (P504,000)
T
T
= P176,400
Proof:
Net income before bonus and income tax
Less: Bonus
Net income before bonus after income tax..
Less: Income tax
Net income after bonus and income tax
P504,000
65,520
P438,480
_176,40
0
P262,080
P504,000
176,400
P327,600
____ 20%
P 65,520
8. Bonus is based on net income, that is, after bonus and income tax:
Let B
B
B
Let T
T
T
Proof:
Net income before bonus and income tax
Less: Bonus
Net income before income tax..
Less: Income tax (35% x P504,000)
Net income after bonus and income tax
P504,000
54,600
P449,400
176,400
P273,000
Problem IV
P273,000
____ 20%
P 54,600
B = Bonus to Rodgers
B = 0.20(Net Income - interest - salary - bonus)
B = 0.20(P168,000 - [0.08(P150,000)] - P60,000 B)
B = 0.20(P96,000 - B)
B = P19,200 - 0.20B
1.20B = P19,200
B = P16,000
Problem V
Interest (8%)
Salary
James
P4,400 (below)
13,000
Keller
P5,600
15,000
Rivers
P7,200
20,000
Totals
P17,200
48,000
(10,560)
P10,040
(17,600)
P9,600
(36,200)
P30,000
P240,00
0
420,000
P660,00
0
12
P
55,000
x
8%
_P
4,400
Rivers
P90,000
0
9,600
(12,000)
P87,600
Totals
P208,000
12,000
30,000
(36,000)
P214,000
Q
P 100,000
43,200
16,800
__35,440
P195,440
Total
P180,000
64,800
26,600
___88,600
P 360,000
Problem VI
1: Net income is P360,000
Salaries
Bonus on net income
Interest on average capital balances
Remainder is P 88,600 (positive)
Totals
P
P 80,000
21,600
9,800
___53,160
P 164,560
P
P 80,000
14,400
9,800
_(4,900)
P 99,300
Q
P 100,000
28,800
16,800
__(4,900)
P 140,700
Total
P 180,000
43,200
26,600
__(9,800)
P240,000
P
P 80,000
0
9,800
(123,300)
(P33,500)
Q
P 100,000
0
16,800
(123,300)
(P 6,500)
Total
P 180,000
0
26,600
(246,600)
(P 40,000)
1 and 2.
Total to allocate:
As Bonus (Note A below)
As Salaries
As Interest (Note B below)
Subtotal:
Residual Profit-sharing
Final Allocations:
Total
P150,000
(25,000)
(72,000)
(10,720)
P 42,280
(42,280)
P
0
Carey
Drew
P25,000
36,000
6,560
P67,560
21,140
P88,700
P36,000
4,160
P40,160
21,140
P61,300
Capital
Amount
P100,000
(12,000)
88,000
(12,000)
76,000
(12,000)
P 64,000
Fraction
of Year
1/12
Interest
Rate
0.08
= Subtotal
P 667
6/12
0.08
3,520
3/12
0.08
1,520
2/12
1.0000
0.08
853
P6,560
Capital
Amount
P70,000
(12,000)
58,000
(12,000)
Fraction
of Year
1/12
Interest
Rate
0.08
= Subtotal
P 467
6/12
0.08
2,320
Note A (Bonus):
Bonus = .20(Net Income
1.2Bonus = .20(P150,000)
1.2Bonus = 30,000
Bonus = P25,000
Bonus)
Note B (Interest):
Carey:
Drew:
46,000
(12,000)
P34,000
3/12
0.08
920
2/12
1.0000
0.08
453
P4,160
Problem VIII
Jones would have to receive a bonus of P12,000 to be indifferent to the two profit-sharing
options. Since Cable would receive the same bonus, the total bonus would have to be
P24,000. Therefore,
P24,000 = 10% (Net income - Salaries - Bonuses)
P24,000 = 10% (Net income - [30,000 + 40,000] - 24,000)
P24,000 = 10% (Net income - 94,000)
P24,000 = 10% Net income - 9,400
P33,400 = 10% Net income
Net income P334,000
Problem IX
1. It should be noted that the order of priority is of no significance when it comes to
allocation of net income. Unless in cases, when there is a resulting residual loss, wherein
the residual loss should be allocated based on their agreement. In this case, there is no
such agreement, so the allocation would still be to satisfy completely all provisions of the
profit and loss agreement and use the profit and loss ratios to absorb any deficiency or
additional loss cause by such action.
Olsen
Katch
Total
Interest
P 2,000
P 2,400
P 4,400
Bonus
10,000
10,000
Salaries
48,000
36,000
84,000
Remainder (6:4)
__8,040
__5,360
_13,400
P58,040
P26,960
P85,000
Weighted Average Calculation:
Olsen:
1/1 to 4/1
4/1 to 10/1
10/1 to 12/31
Total
Average
Capital
Balance
20,000
25,000
30,000
Gross
# of Months
3
6
3
Capital
Balance
40,000
30,000
20,000
30,000
Gross
# of Months
2
6
2
2
Capital
60,000
150,000
90,000
300,000
25,000
Katch:
1/1 to 3/1
3/1 to 9/1
9/1 to 11/1
11/1 to 12/31
Total
Average
2.
Olsen
Katch
Capital
80,000
180,000
40,000
60,000
360,000
30,000
Total
Salaries
Bonus
Interest*
Remainder
Final Profit:
P48,000
2,000
39,960
P89,960
P36,000
10,000
2,400
26,640
P75,040
1/1 to 6/1
6/1 to 10/1
10/1 to
12/31
Matt
Cap Bal # months
35,000
5
45,000
4
50,000
3
Total
Average
1/1 to 3/1
3/1 to 9/1
9/1 to 11/1
11/1 to
12/1
12/1 to
12/31
Jef
Cap Bal # months
25,000
2
35,000
6
25,000
2
20,000
1
28,000
Salary
Bonus
Interest
Subtotal
Remainder
Total
2.
Salary
Bonus
Interest
Subtotal
Remainder
Total
3.
Salary
Bonus
505,000
42,083
Gross Cap
50,000
210,000
50,000
20,000
1
Total
Average
1.
Gross Cap
175,000
180,000
150,000
28,000
358,000
29,833
Matt
P N/A
N/A
4,208
P 4,208
29,404
P33,612
Jeff
N/A
N/A
2,983
P 2,983
29,405
P32,388
Matt
0
N/A
5,000
P 5,000
29,520
P34,520
Jeff
P 9,000
N/A
2,800
P11,800
19,680
P31,480
Total
P 9,000
0
7,800
P16,800
49,200
P66,000
Matt
P10,000
N/A
Jeff
P15,000
N/A
Total
P25,000
0
Total
0
0
7,191
P 7,191
58,809
P66,000
P
P 84,000
10,000
4,400
66,600
P165,000
Interest
Subtotal
Remainder
Total
N/A
P10,000
23,992
P33,992
N/A
P15,000
17,008
P32,008
0
P25,000
41,000
P66,000
Salary
Bonus*
Interest
Subtotal
Remainder
Total
Matt
P20,000
6,000
4,208
P30,208
(1,096)
P29,112
Jeff
P35,000
N/A
2,983
P37,983
(1,095)
P36,888
Total
P55,000
6,000
7,191
P68,191
(2,191)
P66,000
BB
12,000
17,280
( 900)
28,380
4.
Problem XI
CC
13,600
24,840
( 900)
37,540
Total
40,000
55,080
( 3,000)
92,080
AA
96,000
BB
144,000
CC
216,000
Total
456,000
24,000
26,160
( 9,000)
137,160
28,380
( 9,000)
163,380
(36,000)
37,540
( 9,000)
208,540
(12,000)
92,080
(27,000)
509,080
Total
55,080
( 3,000)
52,080*
14,400
12,000
13,600
AA
96,000
24,000
11,760
14,400
( 9,000)
137,160
BB
144,000
16,380
12,000
( 9,000)
163,380
CC
216,000
( 36,000)
23,940
13,600
( 9,000)
208,540
Problem XII
Partners
Cumulative
Components of Allocation
Durand
Profit/loss percentage.............................
35%
Gain on sale of equipment.....................
P 5,000
....................................................15,000
Salaries..................................................
40,000
..................................................105,000
Bonus (Note A).......................................
............
Bonus (Note A).......................................
2,692
Interest on capital (Note B)....................
7,958
Remaining profit (loss)...........................
14,280
Profit (loss) allocation.............................
Price
25%
P 5,000
Russell
40%
P 5,000
20,000
45,000
5,000
2,692
11,417
10,200
P 69,930
Total
..............
P
............
5,000
2,692
8,076
6,750
26,125
16,319
40,799
P 54,309 P75,761
P200,000
31,250
P125,000 1/12 =
28,333
20,000
10,417
P40,000
1/12 =
120,000 2/12 =
20,000
70,000
11/12 =
115,000 3/12 =
110,000 6/12 =
28,750
55,000
114,167
10%
P 79,583
10%
10%
P
7,958
6,750
P
P
Problem XIII
1. Distribution of income for 20x4:
Interest
Compensation
Subtotals
Allocation of remainder
Totals
Norr
P 12,000
__10,000
P 22,000
__14,640
P 36,640
Caylor
P 9,600
__14,000
P 23,600
__9,760
P 33,360
P
100,000
36,640
_(12,000
)
P
124,640
Russell
Caylor
P 80,000
33,360
_(12,000)
P
101,360
Total
P 21,600
__24,000
P 45,600
__24,400
P 70,000
11,417
P 67,500
P
Interest
Compensation
Subtotals
Allocation of remainder
Totals
Norr
P 14,957
__8,000
P 22,957
__13,872
P 9,085
Caylor
P 12,163
__12,000
P 24,163
__9,248
P 14,915
Total
P 27,120
__240,000
P 47,120
_(23,120)
P 24,000
Norr
Caylor
P
124,640
9,085
_(12,000
)
P
121,725
P
101,360
14,915
_(12,000)
P
104,275
Problem XIV
1.
The interest factor was probably inserted to reward Page for contributing P50,000 more to the
partnership than Childers. The salary allowance gives an additional P15,000 to Childers in
recognition of the full-time (rather than part-time) employment. The 40:60 split of the remaining
income was probably negotiated by the partners based on other factors such as business
experience, reputation, etc.
2.
The drawings show the assets removed by a partner during a period of time. A salary allowance is
added to each partner's capital for the year (usually in recognition of work done) and is a
component of net income allocation. The two numbers are often designed to be equal but
agreement is not necessary. For example, a salary allowance might be high to recognize work
contributed by one partner. The allowance increases the appropriate capital balance. The partner
might, though, remove little or no money so that the partnership could maintain its liquidity.
3.
Page, Drawings .......................................................................
Repair Expense ....................................................................
(To reclassify payment made to repair personal residence.)
5,000
13,000
11,000
5,000
13,000
11,000
59,000
31,000
31,000
(To close net income to partners' capitalsee allocation plan shown below.)
Allocation of Income
Page
Interest (10% of beginning balance)
P 8,000
Salary allowances
5,000
Remaining income (loss):
P31,000
(11,000)
(25,000)
11,000
20,000
Childers
P 3,000
20,000
P (5,000)
4.
(2,000) (40%)
P11,000
(3,000) (60%)
P20,000
P4,400
P6,600
Cash
......................................................................................
Smith, Capital (20% of total capital) ....................................
Page, Capital .......................................................................
Childers, Capital ..................................................................
43,000
32,000
4,400
6,600
45,000
50,000
(96,000)
31,000
P 30,000
2. b
Salaries
Bonus
Interest (20% x average capital)
Balance - equally
10M
A
2,000
8,000
8,000
8,500
44,500
B
25,000
0
10,000
8,500
10M
45,000
8,000
18,000
1,700
8,800
4. a
The net income of P80,000 is allocated to Blue and Green in the following
manner:
Blue
Green
Net Income
P 80,000
Salary allowances
P 55,000
P45,000
(100,000)
Remainder
P (20,000)
Allocation of the negative
remainder in the
60:40 ratio
(12,000)
(8,000)
20,000
Allocation of net income
P 43,000
P37,000
P
-0-
A
30,000
3,600
5,000
Salaries
Bonus*
Interest: 10% x Ave. capital
1:3
Total
B
P 45,000
6,500
4,625
P 43,225
Total
P 75,000
3,600
11,50
0
18,500
P
108,600
5. a
A
Salaries
P
40,000
B
P 45,000
6,000
9,000
(32,000)
P
14,000
(16,000)
P 38,000
Total
P 85,000
0
15,00
0
(48,000)
P 52,000
Note:
1. The basis of the bonus is negative, so theres no bonus at all.
2. It should be noted that the order of priority is of no significance when it comes to
allocation of net income. When there is a resulting residual loss, wherein the
residual loss should be allocated based on their agreement. In this case, there is
no such agreement, so the allocation would still be to satisfy completely all
provisions of the profit and loss agreement and use the profit and loss ratios to
absorb any deficiency or additional loss caused by such action.
6. d
Salaries
Bonus*
3:4:3
Total
A
P 40,000
__3,000
P 43,000
B
P 40,000
4,000
C
P 1,000
_3,000
P 4,000
Total
P 80,000
1,000
10,000
P 91,000
7. c
A
Salaries
P
41,600
2,000
(16,500)
P
27,100
B
P 38,400
3,500
Total
P 80,000
0
5,500
(49,500)
P 52,000
Note:
1. The basis of the bonus is negative, so theres no bonus at all.
2. It should be noted that the order of priority is of no significance when it comes to
allocation of net income. When there is a resulting residual loss, wherein the
residual loss should be allocated based on their agreement. In this case, there is
no such agreement, so the allocation would still be to satisfy completely all
provisions of the profit and loss agreement and use the profit and loss ratios to
absorb any deficiency or additional loss caused by such action.
8. b
2/1/20x4: P20,000 x 4 = P 80,000
6/1/20x4: P40,000 x 3 = 120,000
9/1/20x4: P30,000 x 4 = 120,000
P 320,000 / 12 months = P26,667
9. c
Salaries
6:4
Total
10.
11.
12.
13.
14.
15.
16.
17.
18.
Mack
P 90,000
Ruben
P 60,000
_30,000
P120,00
0
__20,000
P 80,000
Total
P
150,000
50,000
P
200,000
150,000
Z: P225,000 x 9 = P2,025,000
P155,000 x 3 =
465,000 P2,490,000/12 = 207,500
P 487,500 x 10% = P48,750
19. d - ASSIGNMENT OF INCOME
Interest10% of
beginning capital ........................
Salary ..............................................
Allocation of remaining income
(P6,000 divided on a 3:3:4 basis) ......1,800
Totals ....................................
ARTHUR
BAXTER
CARTWRIGHT
P 6,000
20,000
P 8,000
P10,000
20,000
1,800
P 7,800
2,400
P29,800
6,000
P12,400
ARTHUR
P60,000
7,800
(5,000)
P62,800
BAXTER
P80,000
29,800
(5,000)
P104,800
TOTAL
P24,000
P50,000
STATEMENT OF CAPITAL
Beginning capital ..............................
Net income (above) ...........................
Drawings (given) ...............................
Ending capital ...................................
20. a
ASSIGNMENT OF INCOMEYEAR ONE
WINSTON
Interest10% of
beginning capital ........................
P11,000
Salary ..............................................20,000
-0Allocation of remaining loss
CARTWRIGHT
P100,000
12,400
(5,000)
P107,400
TOTAL
P240,000
50,000
(15,000)
P275,000
DURHAM
SALEM
TOTAL
P 8,000
10,000
P11,000
30,000
P30,000
(24,000)
P (8,000)
(80,000)
P (3,000)
P (20,000)
DURHAM
P80,000
(8,000)
(10,000)
P62,000
SALEM
P110,000
(3,000)
(10,000)
P 97,000
TOTAL
P300,000
(20,000)
(30,000)
P250,000
WINSTON
P110,000
(9,000)
(10,000)
P 91,000
DURHAM
P 6,200
10,000
SALEM
TOTAL
P 9,700
30,000
P25,000
(4,500)
P3,200
(15,000)
P15,200
DURHAM
P62,000
3,200
(10,000)
P55,200
SALEM
P 97,000
15,200
(10,000)
P102,200
P40,000
21. a
Capital, Beginning
Additional investment
Withdrawals
Net income
Net Decrease
22.
WINSTON
P 91,000
21,600
(10,000)
P102,600
TOTAL
P250,000
40,000
(30,000)
P260,000
25,000
(130,000)
45,000 / 30% = P 150,000
(60,000)
a
10% interest a Average capital
Salaries
Equally
F
12,000
30,000
(35,000)
G
6,000
________
H
4,000
20,000
_________
Total
22,000
50,000
(105,000
)
(33,000)
D
25,000
13,000
28,200
66,200
E
20,000
F
25,000
14,100
34,100
_4,700
29,700
Total
70,000
13,000
47,000
130,000
C
100,000
29,000
(12,000)
117,000
W
150,000
63,000
(12,000)
20,100
N
200,000
58,000
(12,000)
24,600
Total
450,000
150,000
(36,000)
564,000
7,000
23. d, P66,200; E, P34,100; F, P29,700
Salaries
Bonus on income (10% x P130,000)
Remainder (6:3:1)
24. a
Capital, 1/1/x4
Net Income 20x4
Withdrawal personal
Capital, 12/31/x4
C
10,000
19,000
29,000
W
15,000
10,000
38,000
63,000
N
20,000
38,000
58,000
Total
45,000
10,000
95,000
150,000
Capital, 1/1/x5
Net income
Withdrawals personal
Capital, 12/31/x5
117,000
34,420
(12,000)
139,420
201,000
75,540
(12,000)
264,540
246,000
70,040
(12,000)
304,040
564,000
180,000
(36,000)
708,000
117,000
34,420
(12,000)
139,420
201,000
75,540
(12,000)
264,540
246,000
70,040
(12,000)
304,040
564,000
180,000
(36,000)
708,000
28. b
Capital, 1/1/YearI
Net income (loss)
Withdrawals personal
Capital, 12/31/ Year I
Y
143,000
(11,700)
(13,000)
118,300
E
104,000
(10,400)
(13,000)
80,600
I
143,000
(3,900)
(13,000)
126,100
Total
390,000
(26,000)
(39,000)
325,000
26,000
14,300
(52,000)
(11,700)
10,400
(20,800)
(10,400)
13,000
14,300
(31,200)
(3,900)
3,900
3,900
(10,400)
(2,600)
Capital, 1/1/Year2
Net income (loss)
Withdrawals personal
Capital, 12/31/ Year 2
118,300
28,080
(13,000)
133,380
80,600
76,700
(13,000)
144,300
126,100
19,760
(13,000)
132,860
325,000
52,000
(3,900)
338,000
26,000
11,830
(9,750)
28,080
5:2:3
8,060
(3,900)
13,000
12,610
(5,850)
3,900
32,500
(19,500)
76,700
19,750
52,000
32. d
Because both partners have equal capital balances, NN's capital has to be increased to
equal that of MM's. Since MM's capital balance is P60,000 and NN's is P20,000, an
additional P40,000 has to be credited to NN's capital to make it equal MM's capital. This
additional amount credited to NN's capital is the goodwill that NN is bringing to the
partnership.
34. b
2/1/20x4: P20,000 x 4 = P 80,000
6/1/20x4: P40,000 x 3 = 120,000
9/1/20x4: P30,000 x 4 = 120,000
P 320,000 / 12 months = P26,667
35. b
Interest: (P500,000 x 10%)
= P50,000
Salary: (P10,000 + P20,000) = P30,000
Bonus:
= P0
37. c
Salaries
Bonus*
J
P 50,000
16,000
P
P 60,000
8,000
B
P 30,000
16,000
Remainder (3:4:3)
Total
(6,000)
P 60,000
(8,000)
P 60,000
(6,000)
P 40,000
Total
P140,000
40,00
0
(20,000)
P160,000
*since problem is silent it should be based on net income before any deductions.
38. c
Salaries
Bonus (10% of average capital)
A
P 30,000
5,000
P
P 10,000
3,000
B
P 40,000
2,000
Remainder (4:4:2)
Total
_ 24,000
P 59,000
__24,000
P 37,000
_12,000
P 54,000
Salaries
Bonus (10% of average capital)
A
P 30,000
5,000
P
P 10,000
3,000
B
P 40,000
2,000
Remainder (4:4:2)
Total
(16,000)
P 19,000
(16,000)
(P3,000)
( 8,000)
P 34,000
Total
P 80,000
10,00
0
60,000
P150,000
39. c
Total
P 80,000
10,00
0
(40,000)
P 50,000
40. b
Total agreed capital = total contributed capital*
(P200,000 + P100,000 + P100,000)
Multiplied by: Capital interests of May
P
400,000
_____35%
P
140,000
41 d
P60,000, salary = P25,000, salary + [.20 (NI B)]
P60,000 = P25,000 + P35,000, bonus
Therefore, bonus would be P35,000
B = .20 (NI B)
P35,000 = . 20 (NI P35,000)
P35,000 = .20NI P7,000
P35,000 + P7,000 = .20NI
P42,000 = .20NI
NI = P210,000
43. b
[P70,000 (P40,000 + P10,000 +P2,000)]
- Salary to partners is an allocation of net income (they are not expenses)
- Partners withdrawals are deduction to capital accounts.
44. c
Bonus = 20% (NI before deduction on salaries, interests and bonus)
B = 20% (NI after deduction of salaries, interests and bonus + salaries + interests
+ bonus)
B = 20% [P46,750 + (P1,000 x 12 months) + (.05 x P25,000) + B]
B = .20 [P60,000 + B]
B = P12,000 + .20B
1.20 B = P12,000
B = P15,000
45. a
Allocation/Distribution of Net Income
DD
EE
Salaries
18,000
24,000
Interest (10% of Ave. Cap.)
15,000
20,000
Balance/Remainder (60%:40%)
25,800
17,200
Share in Net Income
58,800
61,200
*P 500,000 P100,000 (excluding salaries and int. P100,000
Total
42,000
35,000
__43,000
120,000*
DD
150,000
58,800
(18,000)
190,800
EE
180,000
60,000
61,200
(24,000)
277,200
Total
330,000
60,000
1240,000
( 42,000)
468,000
DD
P 15,000
51,000
P 66,000
EE
P20,000
34,000
P54,000
Total
P 35,000
85,000
P 120,000
DD
P 150,000
EE
P 180,000
60,000
54,000
24,000
( 24,000)
P 294,000
66,000
18,000
( 18,000)
P 216,000
49. a
Salary allowances
NN
P180,00
OO
P
Total
P180,000
Balance/Remainder: Equally
Net Income for 20x5
Adjustment of net income for 20x4 60% :
40%
Total
0
15,000
P195,00
0
24,000
15,000
P
15,000
16,000
30,000
P
210,000
40,000
50 53: No requirement
54. b
Old P & L
Abe
Bert
Carl
Dave
Total
70%
20%
10%
100%
Interests
Acquired
85%
15%
100%
New P & L
59.50%
17.00%
8.50%
15.00%
100%
55. b
Unadjusted net income, 20x5
Add (deduct): adjustments Accrued expense 20x5
Accrued income 20x5
Prepaid expense 20x4
Deferred or unearned income 20x4
Adjusted net income, 20x5
Multiplied by: P& L of Dave
Share in net income 20x5
P
15,000
(1,050)
875
(1,400)
__1,225
P
14,650
_____17%
P2,490.5
0
Quiz II
1. P47,500 = [(P0,000 x 4) + (P40,000 x 6) + (P65,000 x 2)]/12
2. P6,400 = [(P60,000 x 2) + (P90,000 x 5) + (P70,000 x 4) + P110,000] (.08)
3. P3,703 - B = .08(P250,000 - P200,000 - B)
4. P39,150 = (P130,000 - P10,000 - P15,000 - P18,000) .45
5. Nick, P44,075; Joe, P48,435; Mike, P57,490
Nick
Joe
Mike
Total
Interest on capital
P200,000 x .09
P18,000
P350,000 x .09
P31,500
P180,000 x .09
P16,200
P65,700
Salary
25,000 15,000
35,000
75,000
Bonus .1(P150,000 - P100,000)
5,000
5,000
Residual
P4,300 x .25
P4,300 x .45
P4,500 x .30
Totals
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
1,075
______
1,935
_______
1,290
4,300
P44,075 P48,435 P57,490
P150,000
18. P310,000
Using bonus formula to solve for income:
Bonus = .20 (NI Bonus Salary)
35,000 = .20 NI [.20 x P35,000] [.20 x P100,000*]
62,000 = .2Income
P310,00 = income
0
*salaries 25,000 + 75,000
19. James, P58,360; Keller, P68,040; Rivers, P87,600
James
Interest 8%
4,400
Salary
13,000
2:3:5
(7,040)
Total
10,360
Keller
5,600
15,000
(10,560)
10,040
Rivers
7,200
20,000
(17,600)
9,600
Total
17,200
48,000
(35,200)
30,000
Interest:
James: P48,000 x 5 = P240,000
P60,000 x 7 =
Capital, beginning
Additional investments
420,000 P660,000/12 =
48,000
12,000
P55,000 x 8% = P4,400
70,000
90,000
208,000
12,000
10,360
(12,000)
58,360
10,040
(12,000)
68,040
9,600
(12,000)
87,600
30,000
(36,000)
214,000
JJ
P18,000
15,000
(6,000)
P27,000
KK
P
-030,000
(6,000)
P24,000
-045,000
(6,000)
P39,000
SS
TT
Totals
6,600 (below)
4,000
2,000
25,0008,000
51,000
( 8,000) (16,000) (40,000)
21,000 (6,000) 23,600
LL
4,720
4,766
32,400
30,088
9,610
INCOME ALLOCATION20x4
LL
CC
Interest (12% of beginning capital)
2,400
7,200
Salary
12,000
8,000
Remaining income/loss
(19,680)
(32,800)
Totals
(5,280)
(17,600)
P18,000
90,000
(18,000)
P90,000
12,600
P180,000
612,000
P792,000
12
P 66,000
10%
P 6,600
TT
20,000
-0(6,000)
(12,000)
2,000
Totals
120,000
8,000
23,600
(36,000)
115,600
32,880
37,146
36,243
70,000
72,000
36,147
RR
6,000
-0(13,120)
(7,120)
Total
15,600
20,000
(65,600)
(30,000)
Total
130,000
(5,280)
(10,000)
4,720
(17,600)
(10,000)
32,400
INCOME ALLOCATION20x5
LL
CC
Interest(12% of beginning capital above)
*566
3,888
Salary .....................................
12,000
20,000
Remaining income/loss:
(2,520)
(4,200)
Totals...................
10,046
7,688
*Rounded
(7,120)
(10,000)
32,880
(30,000)
(30,000)
70,000
RR
3,946
8,000
Total
8,400
-0-
(1,680)
2,266
(8,400)
20,000
Total
70,000
12,000
20,000
(30,000)
72,000
INCOME ALLOCATION20x6
LL
CC
Interest (12% of beginning capital
above)* ..............................
572
3,611
Salary .....................................
12,000
8,000
Remaining income....................
2,272
4,544
Totals.............................
14,844
16,155
*Rounded
RR
Total
4,457
-04,544
9,001
8,640
20,000
11,360
40,000
2,700
2,820
120
5,400
Julio
P 6,000
Fong
P 6,000
(7,200)
(4,800)
(3,240)
(2,160)
1,620
1,080
Total
72,000
40,000
(30,000)
82,000
accounts
THEORIES
True of False
1 False
.
2 True
.
3 True
.
4 False
.
5 True
.
P(2,820)
6.
False
7.
True
8.
False
9.
True
10
.
False
11
.
12
.
13
.
14
.
15
.
True
True
False
True
False
16
.
17
.
18
.
19
.
20
.
True
False
False
True
True
21
.
22
.
23
.
24
.
25
.
120
False
26.
False
True
27.
True
False
28.
False
True
False
Multiple Choice
29 c
34.
.
30 d
35.
.
31 c
36.
.
32 d
37.
.
33 a
38.
.
d
d
c
d
a
39
.
40
.
41
.
42
.
43
.
b
e
c
b
d
44
.
45
.
46
.
47
.
c
a
b
C