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Compute for the amount of reduction in capital of ABC in the first month

Compute for the amount of reduction in capital of ABC in the first month

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1. Partners ABC

Partners ABC and DEF have decided to liquidate their business. The following information is available: Cash Inventory Lily, Receivable Total P 180,000 Accounts Payable 250,000 ABC, Capital 5,000 DEF, Capital P 435,000 Total P 100,000 150,000 185,000 P405,000 ABC and DEF share profits and losses in a 3:2 ratio. During the first month of liquidation, half of the inventory was sold for P60,000, and P50,000 of the accounts payable is paid. The partners are expecting additional liquidation expense in the future for P10,000 that is why they have allotted a contingency fund of P10,000. During the second month, the rest of the inventory is sold for P45,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. Compute for the amount of reduction in capital of ABC in the first month of liquidation.
Transcribed Image Text:Partners ABC and DEF have decided to liquidate their business. The following information is available: Cash Inventory Lily, Receivable Total P 180,000 Accounts Payable 250,000 ABC, Capital 5,000 DEF, Capital P 435,000 Total P 100,000 150,000 185,000 P405,000 ABC and DEF share profits and losses in a 3:2 ratio. During the first month of liquidation, half of the inventory was sold for P60,000, and P50,000 of the accounts payable is paid. The partners are expecting additional liquidation expense in the future for P10,000 that is why they have allotted a contingency fund of P10,000. During the second month, the rest of the inventory is sold for P45,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. Compute for the amount of reduction in capital of ABC in the first month of liquidation.
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