SAMPLE PROBLEM
On January 3, 2025, Dray, Klay, and Andrei decided to form a partnership by investing ₱60,000,
₱90,000, and ₱120,000, respectively. The partners agreed on the following profit and loss
allocation:
1. A salary allowance of ₱12,000 each per annum will be distributed to all partners.
2. An interest of 5% will be allowed based only on the ending capital balance.
3. Bonus is given to Dray equivalent to 15% of the net income in excess of 50,000.
4. Any remainder will be divided in the ratio of 2:3:5 among Dray, Klay, and Andrei.
During the year, the partnership earned a net of ₱300,000.
Additional Information:
The following are the additional investments and withdrawals of the partners
during the year
Date Type Dray Klay Andrei
March 31 Investments 22,000 55,000 80,000
May 1 Temporary Drawing (8,000) (16,000) (20,000)
July 15 Permanent Drawing (5,000) (12,000) (8,000)
September 30 Investments 10,000 6,000 18,000
November 30 Investments 20,000 4,000 10,000
Requirements:
1. Prepare a schedule for allocation of profit to Dray, Klay, and Andrei
2. Compute the ending capital balances of each partner after closing
3. Compute the loss allocation if the partnership incurred losses of P150,000.00
Additional Considerations:
1. Bonus, interest and Salaries (BIS) are considered as expense
2. Minimum Profit Share:
Klay is guaranteed a minimum profit share of ₱90,000.
Andrei is guaranteed a minimum profit share of ₱120,000
3. Order of Priority/Extent of Income: When distributing the ₱80,000 profit, the following
order of priority applies:
Salaries
Bonus
Interest
Sample Problem 2
Partners Moses and Jonathan formed a partnership on January 1, 2025. The agreement states that
profits and losses shall be shared in proportion to their capital balances but does not specify
which method to use. Jonathan contributed P150,000 on January 1 and made no investments and
withdrawals for the year 2025.
Investments and Withdrawals made by Moses
Date Type Amount Balance
January 1 Beginning Capital 100,000 100,000
May 1 Additional Investment 50,000 150,000
August 1 Temporary Withdrawal (20,000) 130,000
(Drawings)
October 1 Permanent Withdrawal (40,000) 90,000
The partnership earned a net income of ₱60,000 for the year ended December 31, 2025.
Required:
Compute the profit-sharing ratio under each of the following methods:
a. Beginning Capital
b. Ending Capital (excluding temporary drawings)
c. Simple Average
d. Weighted Average (Peso-Month Method)
Sample Problem 3
On January 2, 2025, Kyrie and Kevin formed a partnership by investing ₱150,000 and ₱200,000,
respectively. The partners agreed on the following profit and loss allocation:
1. A salary allowance of ₱5,000 per month will be distributed to each partner.
2. An interest of 6% will be allowed based on the weighted average capital balances.
3. Bonus is given to Kyrie equivalent to 15% of the net income in excess of 50,000.
4. Any remainder will be divided in the ratio of 3:2 between Kyrie and Kevin.
During the year, the partnership earned a net income of ₱280,000
The following are the additional investments and withdrawals of the partners during the year:
Date Type Kyrie Kevin
February 28 Additional Investment 40,000 30,000
April 30 Temporary Withdrawal (12,000) (10,000)
(Drawings)
June 30 Permanent Withdrawal (8,000) (15,000)
August 31 Additional Investment 20,000 25,000
December 31 Additional Investment 10,000 5,000
Requirement:
4. Prepare a schedule for allocation of profit to Kyrie and Kevin