Problem #19

Distribution of Profits or Losses Based on Partners' Agreement

Toys for the Big Boys is a partnership that sells sporting goods. The partnership agreement provides 10% interest on invested c
to Alvaro and P280,000 to Yacapin; and bonus for Alvaro. The 2019 capital accounts were as follows:

Required: For each independent situations, prepare the profit distribution schedule.

1 Alvaro Yacapin
Salary Allowances 240000 280000
Interest on Average Capital Balances 45000 76250
Bonus 30600 -

Balance to be Divided in Ratio of 3:2 -17550 -11700

Share of Partners in Profit/Loss 298050 344550

Computation:
Interest on Average Capital Balances
Alvaro: 500,000 + 400,000 * 10%
380000

Yacapin= 700,000+825,000*10%
Yacapin=76,250

Bonus
Profit before bonus= 642,600 105%
Profit after bonus= 612,000 100%
Bonus= 30,600 5%

Balance to be Divided in Ratio of 3:2

Profit 642600
-671850
Loss/Remainder -29250

Distribution 3:2
Alvaro= 29,250*3/5
Alvaro= -17,550

Yacapin= 29,250*2/5
Yacapin=-29,250

2
Alvaro Yacapin
Salary Allowances 240000 280000
Interest on Ending Capital after Salaries 16000 54500
Bonus 62741 -
 Balance to be Divided Equally 216879.5 216879.5
Share of Partners in Profit/Loss 535620.5 551379.5

Computation:
Interest on Ending Capital after Salaries
Alvaro: (400,000-240000) * 10%
Alvaro= 16,000

Yacapin= (825,000-280,000)*10%
Yacapin=54,500

Bonus
Profit before bonus= 847,000 108%
Profit after bonus= 784,259 100%
Bonus= 62,741 8%

Balance to be Divided Equally

Profit 1087000
-653241
Loss/Remainder 433759

Distribution 1:1
Alvaro= 433,759/2
Alvaro= 216,879.5

Yacapin= 433,759/2
Yacapin=-216,879.5

3
Alvaro Yacapin
Salary Allowances 240000 280000
Interest on Beginning Capital Balances 50000 70000
Bonus 85500 -

Balance to be Divided in Ratio of 4:2 29333 14667

Share of Partners in Profit/Loss 404833 364667

Computation:
Interest on Ending Capital after Salaries
Alvaro: 500,000 * 10%
Alvaro= 50,000

Yacapin= 700,000*10%
Yacapin=70,000

Bonus
Profit before bonus= 769,500 112.5%
 Profit after bonus= 684,000 100%
Bonus= 85,500 12.5%

Balance to be Divided in Ratio of 4:2

Profit 769500
-725500
Loss/Remainder 44000

Distribution 4:6
Alvaro= 44,000*4/6
Alvaro= 29,333

Yacapin= 44,000*2/6
Yacapin=-14,667

Problem #20
Preparation of the Financial Statements

Castor, Arenas and Laurente, who are partners in the Super Manila Novelty Store, share profits in the ratio of 30:20:50.
Required: 1. Prepare the 2019 Statement of Comprehensive Income. Show the division of profit at the lowerer portion of the s
2. Prepare the Statement of Changes in Partners' Equity for 2019. Assume the following additional informati
3. Prepare the Statement of Financial Position as at Dec.31, 2019

Super Manila Novelty Store

Statement of Comprehensive Income
For the year Ended December 31, 2019

Sales
Less:
Cost of sales 1450000
Salaries Expense 450000
Rent Expense 200000
Insurance Expense 30000
Utilities Expense 20000
Profit

Division of Profit
Castor, Capital 105000
Arenas, Capital 70000
Laurente, Capital 175000
Total 350000

Super Manila Novelty Store

Statement of Changes in Equity
For the year Ended December 31, 2019
 Castor Arenas
Original Investments 75000 300000
Add:Additional Investments 50000 25000
Total 125000 325000
Less: Permanent Withdrawals 0 -50000
Balances 125000 275000
Add:Profit 105000 70000
Total 230000 345000
Less: Temporary Withdrawals 0 0
Partners' Equity, December 31 230000 345000

Super Manila Novelty Store

Statement of Financial Position
December 31, 2019
Assets

Cash
Accounts Receivable
Merchandise Inventory
Prepaid Rent
Prepaid Insurance
Total Assets

Liabilities and Owners' Equity

Accounts Payable 50000
Notes Payable 115000
Total Liabilities 165000

Castor, Capital 230000

Arenas, Capital 345000
Laurente, Capital 285000
Total Equity 860000
Total Liabilities and Equity

Problem #21
Preparation of Financial Statements

The following are the adjusted account balances of Calamba and Santiago as at December 31, 2019

Required: 1. Prepare an income statement for the year. Show the division of profit.
2. Prepare a statement of changes in partners' equity for the year.
3. Prepare a statement of financial position at the end of the year.

Calamba and Santiago

 Statement of Comprehensive Income
For the year Ended December 31, 2019
Net Sales
Gross Sales
Less: Sales Return and Allownaces
Net Sales
Cost of Sales
Merchandise Inventory, 1/1/2019
Purchases 5407160
Less: Purchase Rets. & Allow. 259600
Purchase Discount 43050 302650
Net Purchases 5104510
Transportation In 224880
Net Cost of Purchases
Goods Available for Sale
Less: Merchandise Inventory, 12/31/2019
Cost of Goods Sold
Gross Profit
Operating Expenses
Selling Expense
General Expenses
Total Operating Expense
Operating Profit
Finance Cost
Profit

Calamba Santiago
Salary Allowances 330000 290000
Interest on Beginning Capital Balances 61200 49960

Balance to be Divided equally 14130 14130

Share of Partners in Profit/Loss 405330 354090

Calamba and Santiago

Statement of Changes in Equity
For the year Ended December 31, 2019

Original Investments
Less: Permanent Withdrawals
Balances
Add:Profit
Partners' Equity, December 31

Calamba and Santiago

Statement of Financial Position
December 31, 2019
 Assets
Current Assets:
Cash
Accounts Receivable ₱ 545,070.00
Less: Allowance for Uncollectible Accounts 18790
Prepaid Insurance
Merchandise Inventory
Total Current Assets
Non-Current Assets:
Equipment
Less: Accumulated Depreciation-Equipment
Total Non-Current Assets
Total Assets

Liabilities and Owners' Equity

Accounts Payable
Notes payable
Total Liabilities
Calamba, Capital
Santiago, Capital
Total Equity
Total Liabilities and Equity

Problem #22
Correction of Errors

The Partnership agreement of Pangilinan, Gumban and De Guzman provided that profits are to be divided as follows:
1. Pangilinan is to receive a salary allowance of P100,000, for managing the business.
2. Partners are to receive 10% interest on average capital balances
3. Remaining profits are to be divided in the ratio of 30:30:40 to Pangilinan, Gumban and De Guzman respectively.

Required:
1. Prepare the schedule to allocate the P120,000 loss correctly
2. Prepare the statement of changes in partners' equity
3. Prepare the correcting ournal entry at Dec. 31, 2019 assuminhh that the books have been closed.

1 Pangilinan Gumban
Salary Allowances 100000 -
Interest on Average Capital Balances 56000 105000

Balance to be Divided in Ratio of 30:30:40 -148800 -148800

Share of Partners in Loss 7200 -43800

Computation:
Interest on Average Capital Balances
 Pangilinan: 600,000+520,000/2*10%
Pangilinan=56000

Gumban: 900,000+1,200,000/2*10%
Gumban= 105,000

De Guzman: 1,100,000+1,200,000/2*10%
De Guzman= 115,000

Balance to be Divided in Ratio of 30:30:40

Loss- Sal. Allow.- Interest= 376,000

Pangilinan: -120,000-376,000*30/100
Pangilinan= -148800

Gumban: -120,000-376,000*30/100
Gumban= -148,800

De Guzman: -120,000-376,000*40/100
De Guzman= -59,520

2 Pangilinan, Gumban, DeGUzman

Statement of Changes in Equity
For the year Ended December 31, 2019

Pangilinan Gumban
Original Investments 600000 900000
Add:Additional Investments 0 300000
Total 600000 1200000
Less: Permanent Withdrawals -80000 0
Balances 520000 1200000
Less: Loss 7200 -148800
Total 527200 1051200
Less: Temporary Withdrawals 0 0
Partners' Equity, December 31 ₱ 527,200.00 ₱ 1,051,200.00

3 Account Title Dr
Pangilinan, Drawing 5400.00
Income summary 18120.00
Gumban Drawing
De Guzman Drawing
To distribute the losses among the partners
Problem #23
Correction of Errors

2017
Gascon 40%
Reported Profit/Loss 850000
Bonus -
Salary Allowance -350000
Residual Distribution to Partners 500000 200000
Less: Overstatement of Profit due to
overstatemnt of inventories -70000 -28000
Actual ₱ 430,000.00

2018
Gascon 40%
Reported Profit/Loss 1100000

Less:Bonus -200000 80000

Salary Allowance -350000
Residual Distribution to Partners 550000 220000
Add: Understatement of Profit due to
Understatement of Inventories 80000 32000
Actual ₱ 630,000.00

2019
Gascon 35%
Reported Profit/Loss 1450000
Less:Bonus -350000 70000
Salary Allowance -550000
Residual Distribution to Partners 550000 192500
Add: Understatement of Profit due to
Understatement of Inventories 260000
Less: Understatement of Depreciation
Expense -50000
Less: Overstatement of Profits Due to
Overstatement of Inventories -70000
Actual ₱ 690,000.00
ent provides 10% interest on invested capital; salaries of P240,000
re as follows:

Total
520000
121250
30600

-29250
642600

Total
520000
70500
62741
 433759
1087000

Total
520000
120000
85500

44000
769500
e profits in the ratio of 30:20:50.
of profit at the lowerer portion of the statement.
ume the following additional information.

2500000

-2150000
350000

ore
quity
31, 2019
 Laurente
150000
0
150000
-40000
110000
175000
285000
0
285000

110000
80000
800000
20000
15000
₱ 1,025,000.00

₱ 1,025,000.00

ber 31, 2019

 7155000
375750
6779250

1440590

5329390
6769980
1320420
5449560
1329690

385880
149390
535270
794420
35000
₱ 759,420.00

Total
620000
111160

28260
759420

Calamba Santiago
₱ 612,000.00 ₱ 499,600.00
326400 244800
285600 254800
405330 354090
₱ 690,930.00 ₱ 608,890.00
 ₱ 132,310.00

526280
7350
1320420
1986360

753150
462870
290280
₱ 2,276,640.00

677820
299000
976820
690930
608890
1299820
₱ 2,276,640.00

s are to be divided as follows:

d De Guzman respectively.

been closed.

De Guzman Total
- 100000
115000 276000

-59520 -357120
55480 18880
Uzman
quity
31, 2019

De Guzman
1100000
200000
1300000
-100000
1200000
55480
1255480
0
₱ 1,255,480.00

Cr

5000.00
18520.00
 2017 Adjustments:
Pahilagao 40% Nolasco 20% Total

200000 100000 500000

28000 14000

2018
Pahilagao 40% Nolasco 20% Total

80000 40000

220000 110000 550000

32000 16000

2019
Pahilagao 35% Nolasco 30% Total

70000 35000

192500 165000 550000

 Account Title Dr Cr
Gascon, Capital 28000
Pahilagao, Capital 28000
Nolasco, Capital 14000
Income Summary 70000
To record overstatement of residual profit due
to overstatement of Inventories and profit for
2017

Income Summary 32,000

Gascon, Capital 16,000
Pahilagao, Capital 16,000
To record overstatement of residual profit due
to overstatement of Inventories and profit for
2018