Multiple Choice. (Write your answers before the number. Use capital letter.

)
1. JJ and KK are partners who share profits and losses in the ratio of 60%;40%, respectively. JJ’s salary is P60,000 and P30,000 for KK. The
partners are also paid interest on their average capital balances. In 2019, JJ received P30,000 of interest and KK, P12,000. The profit and
loss allocation is determined after deductions for salary and interest payments. If KK’s share in the residual income (income after
deducting salaries and interest) was P60,000 in 2019, what was the total partnership income?
a. 192,000 b. 345,000 c. 282,000 d. 387,000
2. The partnership has the following accounting amounts:
● Sales = P70,000
● Cost of goods sold = P40,000
● Operating expenses = P10,000
● Salary allocations to partners = P13,000
● Interest paid to banks = P2,000
● Partner’s withdrawals = P8,000
The partnership net income(loss) is
a. 20,000 b. 18,000 c. 5,000 d. (3,000)
3. Lancelot is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income after salary
and bonus as a means of allocating profit among partners. Salaries traceable to the other partners are estimated to be P100,000. What
amount of income would necessary so that Lancelot would consider the choices to be equal?
a. 165,000 b. 290,000 c. 265,000 d. 305,000
4. Cab and Jo are considering forming a partnership whereby profit will be allocated through the use of salaries and bonuses. Bonuses will
be 10% of net income after, total salaries and bonuses. Cab will receive a salary of P30,000 and a bonus. Jo has the option of receiving a
salary of P40,000 and a 10% bonus or simply receiving a salary of P52,000. Both partners will receive the same amount of bonus.
Determine the level of net income that would be necessary so that Jo would be indifferent (the same) to the profit sharing option
selected.
a. 240,000 b. 300,000 c. 94,000 d. 334,000
5. The partnership agreement of XX, YY & ZZ provides for the year-end allocation of net income in the following order:
● First, XX is to receive 10% of net income up to P200,000 and 20% over P200,000.
● Second, YY and ZZ each are to receive 5% of the remaining income over P300,000.
● The balance of income is to be allocated equally among the three partners.
The partnership’s 2019 net income was P500,000 before any allocations to partners. What amount should be allocated to XX?
a. 202,000 b. 216,000 c. 206,000 d. 220,000
6. The partnership agreement of RR and SS provides that interest at 10% per year is to be credited to each partner on the basis of weighted
average capital balances. A summary of the capital account of SS for the year ended December 31, 2019, is as follows:
Balance, January 1 P420,000

Additional investment, July 1 120,000

Withdrawal, August 1 (45,000)

Balance, December 31 495,000

What amount of interest should be credited to SS’s capital account for 2019?
a. 45,750 b. 49,500 c. 46,125 d. 51,750
7. AA, BB, and CC are partners with average capital balances during 2019 of P360,000, P180,000, and P120,000, respectively. Partners
receive 10% interest on their average capital balances. After deducting salaries of P90,000 to AA and P60,000 to CC the residual profit or
loss is divided equally. In 2019 the partnership sustained a P99,000 loss before interest and salaries to partners. By what amount should
AA’s capital account change?
a. 21,000 increase b. 33,000 decrease c. 105,000 decrease d. 126,000 increase
8. AA and DD created a partnership to own and operate a health-food store. The partnership agreement provided that AA receive a salary of
P10,000 and DD a salary of P5,000 to recognize their relative time spent in operating the store. Remaining profits and losses were divided
60:40 to AA and DD, respectively. Income for 2018, the first year of operations, of P13,000 was allocated P8,800 to AA and P4,200 to DD.
On January 1, 2019, the partnership agreement was changed to reflect the fact that DD could no longer devote any time to the store’s
operations. The new agreement allows AA a salary of P18,000, and the remaining profits and losses are divided equally. In 2019 an error
was discovered such that the 2018 reported income was understated by P4,000. The partnership income of P25,000 for 2019 included
the P4,000 related to 2018. In the reported net income of 25,000 for the year 2019, AA and DD would have:
a. 21,900; 3,100 b. 17,100; 17,100 c. 0; 0 d. 12,500; 12,500
9. On January 1, 2019, DD and EE decided to form a partnership. At the end of the year, the partnership made a net income of P120,000.
The capital accounts of the partnership show the following transactions.
DD, Capital EE, Capital

Dr. Cr. Dr. Cr.

January 1 - P40,000 - P25,000

April 1 P5,000 - - -

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 June 1 - - - 10,000

August 1 - 10,000 - -

September 1 - - P3,000 -

October 1 - 5,000 1,000 -

December 1 - 4,000 - 5,000

Assuming that an interest of 20% per annum is given on average capital and the balance of the profits is allocated equally, the allocation
of profits should be:
a. DD, P60,000; EE, P59,400 c. DD, P67,200; EE, P52,800
b. DD, P61,200; EE, P58,800 d. DD, P68,800; EE, P51,200
10. The partnership of DD and BB was formed and commenced operations on March 1, 2019, 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 1, 2019, BB invested an additional P10,000 in
the partnership, DD made a capital withdrawal of P4,000 on May 2, 2019 but reinvested the P4,000 on October 1, 2019. During 2019, DD
withdrew P800 per month and BB, the managing partner, withdrew P1,000 per month. These drawings were charged to salary expense. A
preclosing trial balance taken at December 31, 2019 is as follows:
Debit Credit

Cash P9,000

Receivable – net 15,000

Equipment – net 50,000

Other assets 19,000

Liabilities P17,000

DD, capital 30,000

BB, capital 40,000

Service revenue 50,000

Supplies expense 17,000

Utilities expense 4,000

Salaries expense 18,000

Other miscellaneous expense 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 allowances at a 12% annual rate on average capital balances; and remaining profits allocated equally.
a. DD, P10,520; BB, P13,480 c. DD, P10,800; BB, P13,200
b. DD, P12,000; BB, P12,000 d. DD, P10,600; BB, P13,400
11. AA and BB formed a partnership in 2019 and made the following investments and capital withdrawals during the year:
AA BB

Investments Draws Investments Draws

March 1 P30,000 P20,000

June 1 P10,000 P10,000

August 1 20,000 2,000

December 1 5,000

The partnership’s profit or loss agreement provides for a salary of which P30,000 was paid to each partner for 2019. AA is to receive a
bonus of 10% on net income after salaries and bonus. The partners are also to receive interest of 8% on average annual capital balances
affected by both investments and drawings. Any remaining profits are to be allocated equally among the partners. Assuming net income
of P60,000 before salaries and bonus, determine how the income would be allocated among the partners;
a. AA, P31,138; BB, P28,826 c. AA, P30,633; BB, P29,367
b. AA, P33,537; BB, P26,463 d. AA, P30,684; BB, P29,316

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12. Partner A first contributed P50,000 of capital into an existing partnership on March 1, 2019. On June 1, 2019, the partner contributed
another P20,000. On September 1, 2019, the partner withdrew P15,000 from the partnership. Withdrawals in excess of P10,000 are
charged to the partner’s capital account. The annual weighted-average capital balance is
a. 62,000 b. 51,667 c. 60,000 d. 48,333
13. HH, MM, and AA formed a partnership on January 1, 2019, and contributed P150,000, P200,000,and P250,000, respectively. Their articles
of co-partnership provide that the operating income be shared among the partners as follows: as salary, P24,000 for HH, P18,000 for
MM, and P12,000 for AA; interest of 12% on the average capital during 2011 of the three partners; and the remainder in the ratio of
2:4:4, respectively.
The operating income for the year ending December 31, 2019 amounted to P176,000. HH contributed additional capital of P30,000 on
July 1 and made a drawing of P10,000 on October 1; MM contributed additional capital of P20,000 on August 1 and made a drawing of
P10,000 on October 1; and AA made a drawing of P30,000 on November 1. The partners’ capital balances on December 31, 2011 are:
a. HH, P179,680; MM, P229,360; and AA, P239,360
b. HH, P179,760; MM, P229,520; and AA, P239,520
c. HH, P189,680; MM, P239,360; and AA, P269,360
d. HH, P223,180; MM, P272,060; and AA, P280,760
14. Merlin, a partner in the Camelot Partnership, has a 30% participation in partnership profits and losses. Merlin’s capital account has a net
decrease of P1,200,000 during the calendar year 2019. During 2019, Merlin withdrew P2,600,000 (charged against his capital account)
and contributed property valued at P500,000 to the partnership. What was the net income of the Camelot Partnership for the year 2019?
a. 3,000,000 b. 4,666,667 c. 7,000,000 d. 11,000,000
15. On January 2, 2019, BB and PP formed a partnership. BB contributed capital of P175,000 and PP25,000. They agreed to share profits and
losses 80% and 20%, respectively. PP is the general manager and works in the partnership full time and is given a salary of P5,000 a
month; an interest of 5% of the beginning capital (of both partner) and a bonus of 15% of net income before the salary, interest and the
bonus. The profit and loss statement of the partnership for the year ended December 31, 2019 is as follows:
Net sales P875,000

Cost of goods sold 700,000

Gross profit P175,000

Expenses (including the salary, interest and the bonus) 143,000

Net income P32,000

The amount of bonus to PP in 2019 amounted to:

a. 13,304 b. 16,456 c. 18,000 d. 20,700
16. On January 1, 2019, A, B, C and D formed Bakya Trading Co., a partnership, with capital contributions as follows: A, P50,000; B, P25,000,
C, P25,000; and D, P20,000. The partnership contract provided that each partner shall receive a 5% interest on contributed capital, and
that A and B shall receive salaries of P5,000 and P3,000, respectively. The contract also provided that C shall receive a minimum of P2,500
per annum, and D a minimum of P6,000 per annum, which is inclusive of amounts representing interest and share of remaining profits.
The balance of the profits shall be distributed to A, B, C, and D in a 3:3:2:2 ratio.
What amount must be earned by the partnership, before any charge for interest and salaries, so that A may receive an aggregate of
P12,500 including interest, salary and share of profits?
a. 16,667 b. 30,000 c. 30,667 d. 32,333
17. AA, BB and CC are partners with average capital balances during 2019 of P472,500, P238,650, and P162,350, respectively. The partners
receive 10% interest on their average capital balances; after deducting salaries of P122,325 to AA and P82,625 to CC, the residual profits
or loss is divided equally. In 2019, the partnership had a net loss of P125,624 before the interest and salaries to partners. By what amount
should AA's and CC’s capital account change-increase (decrease)?
a. AA, P30,267; CC, P(40,448) c. AA, P(40,844), CC, P31,235
b. AA, P29,476; CC, P17,536 d. AA, P28,358, CC, P32,458
18. The same information in No. 17, except the partnership had a loss of P125,624 after the interest and salaries to partners, by what amount
should BB’s capital account change-increase (decrease)?
a. (115,443)
b. 23,865
c. (41,875)
d. (18,010)
19. CC, PP and AA, accountants, agree to form a partnership and to share profits in the ratio of 5:3:2. They also agreed that AA is to be
allowed a salary of P28,000, and that PP is to be guaranteed P21,000 as his share of the profits. During the first year of operation, income
from fees are P180,000, while expenses total P96,000. What amount of net income should be credited to each partner’s capital account?
a. CC, P28,000; PP, P16,800; AA, P11,200
b. CC, P25,000; PP, P21,000; AA, P38,000
c. CC, P24,000; PP, P22,000; AA, P38,000
d. CC, P25,000; PP, P21,000; AA, P39,000
20. RR and PP share profits after the provision of annual salary allowances of P14,400 and P13,200, respectively in the ratio of 6:4. However,
if partnership’s net income is insufficient to provide for said allowances in full amount, the net income shall be divided equally between
the partners. In 2019, the following errors were discovered: Depreciation for 2019 is understated by P2,100, and the inventory on

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December 31, 2019 is overstated by P11,400. The partnership net income for 2019 was reported to be P19,500. The capital accounts of
the partners should be increased (decreased) by:
a. RR, P(6,540); PP, P(6,540)
b. RR, P3,000; PP, P3,000
c. RR, P(6,960); PP, 6,540
d. RR, P(6,750); PP, P(6,750)

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