Question

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Merry is a single proprietor of a dressmaking business and agrees to make a partnership business with Jessa who is to contribute cash to give her a 1/3 interest in the business. On November 30, 2015, right before the partnership formation, Merry has a total business assets of P41,000 and a liability of P8,000. The two agreed that in order to establish Merry’s interest in her business, an allowance for doubtful accounts of P426 and an increase in the inventory value of P3,000, be considered. How much cash should Jessa invest in the partnership business?

a. P 14,787                                     c. P 17,787

b. P 15,213                                     d. P 18,213              

McGill and Smyth have capital balances on January 1 of P50,000 and P40,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of P22,000 for McGill and P13,000 for Smyth, (2) interest at 10% on beginning capital balances, and (3) remaining income or loss to be shared 60% by McGill and 40% by Smyth. If net income is 50,000, how much is the share of partner Symth?

a. P31,000         b. P19,000                       c. P17,000                        d. P27,000

Answer 1