COMPREHENSIVE PROBLEMS:

Problem 1 -IGGY and SWAGGY share profits and losses equally after salary and interest allowances. IGGY and SWAGGY receive salary allowances of P 40,000 and P 60,000, respectively, and both partners receive 10% interest on their average capital balances. Average capital balances are calculated at the beginning of each month, regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month. Partners' drawings of P 3,000 per month are not used in determining the average capital balances. Total net income for 2020 is P 240,000

IGGYSWAGGY

January 1 Capital Balances200,000240,000

Yearly drawings (P 3,000 per month)36,00036,000

Permanent withdrawals of capital:

June 324,000

May 230,000

Additional investments of capital:

July 380,000

October 2100,000

REQUIRED:

1.What is the weighted-average capital for IGGY and SWAGGY in 2020?

2.If the average capital for IGGY and SWAGGY from the above information is P 224,000 and P 238,000 respectively, what will be the total amount of profit allocated to salary and interest distributions?

3.If the average capital balances for IGGY and SWAGGY are P 200,000 and P 240,000, what will be the total partnership profit allocations be for IGGY and SWAGGY in 2020?

Problem 2 -LAKERS, JAZZ, and HEAT are partners sharing profits and losses of 40%, 40% and 20%, respectively. The December 31, 2020 balance sheet of the partnership before any profit allocation was summarized as follows:

ASSETSLIABILITIES & CAPITAL

Cash90,000Accounts Payable7,500

Inventories60,000JAZZ, Loan5,000

Equipment75,000LAKERS, Capital100,000

Trademark22,500HEAT, Capital90,000

JAZZ, Capital45,000

Total Assets247,500Total Liabilities & Capital247,500

The income summary account has a credit balance of P 25,000 for the year 2020. On January 1, 2020, a partner has decided to retire from the partnership and by mutual agreement among partners; the following have been arrived at:

• Inventories amounting to P 10,000 is considered obsolete and must be written off
• Equipment should be adjusted to their current value of P 50,000
• Trademarks are to be written-off immediately before the retirement.

It was agreed that the partnership will pay the retiring partner for his interest in the partnership inclusive of loan balance.

REQUIRED:

1.If JAZZ retired and received P 38,500 as a retirement price, how much will be the bonus to or (from) HEAT?

2.If JAZZ retired and received P 38,500 as a retirement price, how much will be the adjusted capital of LAKERS under bonus method?

3.If JAZZ retired and received P 43,500, by how much will the adjusted capital of LAKERS under revaluation of asset method traceable to entire entity (full revaluation)?

4.If JAZZ retired and received P 41,000, by how much will the adjusted capital of HEAT be higher or (lower) than LAKERS under specific revaluation of asset method (specific revaluation)?

5.If JAZZ retired and received P 41,000, by how much will the adjusted capital of LAKERS under specific revaluation of asset method (specific revaluation)?