Use the following information for the next ten (10) questions:

On August 1, 20x1, S and U formed a partnership upon contribution of P6,000,000 and P9,000,000, respectively with capital interest of 3:5, respectively. The partners agreed to bring their capital balances in accordance with their capital interest ration without the necessity of withdrawals or additional investment. The partnership agreement provides that profit or loss shall be distributed in the following manner:

- 8% interest on beginning capital balances.
- P51,000 monthly salary to S and P69,000 monthly salary to U.
- U shall be allowed a bonus of 25% of net income after interests, her salary and bonus.
-The remainder shall be divided on the basis on their original capital interest ratio.

On December 31, 20x1, the income summary account had a credit balance of P900,000. The income tax rate was 30%. During 20x1, the partners regularly withdrew 2/3 of their monthly salary.

On January 1, 20x2, K was admitted to the partnership by paying personally the partners in the amount of P2,500,000 for 20% of their capital interest. As a result of the dissolution, the partnership fully amended their profit or loss agreement. K will have 25% share in the profit or loss while the original partners will share on the remainder in the ratio of 3:2, respectively.

On December 31, 20x2 the income summary account had a debit balance of P500,000. During 20x2, S, U and K made withdrawals of P239,700, P485,300 and P175,000 respectively.

On January 1, 20x3, O was admitted to the newly formed SUKO partnership by investing P5,000,000 for 30% interest in the partnership. The new articles of co-partnership provides that the agreed capitalization should be P25.000.000. S. U. K and O will share profits or loss equally.

For the year ended December 31, 20x3, the partnership realized net income of P1.200,000. S, U. K and O made withdrawals of P220,000, P130,000, P250,000 and P100,000 respectively.

On December 31, 20x3, U decided to retire from the partnership due to personal reasons. The other partners accepted his retirement and the partnership paid her P8,000,000 for her interest in the partnership.

The remaining partners agreed to continue the partnership despite of U's retirement. Their new articles of co-partnership provides that:

. In the event of the death of a partner, the partnership shall continue until the end of the fiscal period.
. Profits and losses are to be shared by S, K and O in the ratio of 2:3:5, respectively.

O died on September 30, 20x4. Profit shall be considered to have been earned evenly during the period and the deceased partner's capital shall be adjusted by his share of the profit to the date of death until the settlement date with the estate, there shall be an added interest at 8% per annum. Payment to the estate shall be made within one year from the date of the partner's death.

For the year ended December, 31, 20x4, the partnership reported net income of P3,500,000. The partners made no withdrawals thought the year.

S and K mutually agreed to continue the partnership. After a year of attempt to carry on with the partnership, Sand K decided to enter into liquidation on December 31, 20x5. During 20x5, the partnership suffered a net loss of P775,775. The partners made no withdrawals throughout the year. As of December 31, 20x5, the partnership reported total assets of P25,000.000. Cash on hand and in bank amounted to P5.000.000. On March 1, 20x5, K extended a loan to the partnership in the amount of P1.000.000, which was still outstanding as of year-end.

S and K are personally insolvent. During the month of January, all of the non-cash assets were sold the partnership paid liquidation expenses of P100,000, paid all liabilities to outsiders, and S received P1,400,000 in full settlement of his interest in the partnership.

Required:
"What is the capital balance of U on January 1, 20x3, after O's admission?
"What is the capital balance of K on January 1, 20x3, after O's admission?
"What is the capital balance of S on December 31, 20x3 after U's retirement?
"What is the capital balance of K on December 31, 20x3 after U's retirement?
"What is the capital balance of O on December 31, 20x3 after U's retirement?
"What is the capital balance of S on December 31, 20x4?
"What is the capital balance of K on December 31, 20x4?
"How much was the partnership liabilities to outsiders as of December 31, 20x5?
"What was the selling price of the non-cash assets sold?
"How much was the loss on realization?

Answer rating: 100% (QA)

1 Us capital balance on January 1 20x3 after Os admission is P7500000 Calculation Us original capital contribution is P9000000 multiplied by the original capital interest ratio of 58 P7500000 2 Ks cap... View the full answer