Partnership accounting_formation and operation

Americano admits Pinoy as a partner in the business.  Accounts in the ledger for Americano on January 31, 2014, just prior the admission of Pinoy, show the following balances:

Cash                                                    P 16,800

Accounts receivable                               15,000

Merchandise Inventory                          39,200

Accounts payable                                   26,000

Americano, capital                                 45,000

            It is agreed the following items must be taken into account:

a.       An allowance for doubtful accounts of 10% of accounts receivable is to be established.

b.      The merchandise inventory is overstated by 3,000

c.       Prepaid expense of P 2,600 and accrued expense of P 1,800 are to be recognized

Pinoy is to invest sufficient cash to obtain a 1/5 interest in the partnership.  They have agreed to follow the following scheme in distributing the profit:

·         Americano shall receive salary allowance of P 3,150 per month and a bonus of 3% of Net Income after salaries and all bonuses

·         Pinoy shall receive salary allowance of P 350 per month a bonus of 2% of Net Income after salaries and all bonuses

·         All partners shall receive annually the following representing incentives based on their capacity to invest:

Americano                   P 7,636

Pinoy                           P 8,727

Annual average income of the partnership would amount to P 197,782.

Required:

a.       Compute the cash investment to be made by Pinoy.

b.      What is the share of the profit of each partner?

c.       The ending capital balance of each partner for December 2014. 

Please email me your answer to the problem:  timoleon.lianza@gmail.com
Deadline: January 15, 2015