M and O decide to form a partnership on June 1, 2020. The partnership will take over their assets as well as assume their liabilities. As of June 1, 2020, the net assets of M and O are P220,000 and P309,375 respectively. Liabilities of M are 55% less than the value of its net assets while liabilities of O are 40% more than the value of its net assets. The partners agreed on a 25:75 profit and loss ratio. Further, the partners arrive at the following agreements: • M's inventory is undervalued by P11,000 • Allowance for doubtful accounts is to be set up in the books of M and O at 10% of the AR balances (M P27,500 and O P41,250) Accrued salaries of P20,250 was not recognized in the books of . How much cash should M invest/(withdraw) so that their capital interest would be equal to their P/L ratio? 95,000 133,250 O (133,250) (95,000)

M and O decide to form a partnership on June 1, 2020. The partnership will take over their assets as well as assume their liabilities. As of June 1, 2020, the net assets of M and O are P220,000 and P309,375 respectively. Liabilities of M are 55% less than the value of its net assets while liabilities of O are 40% more than the value of its net assets. The partners agreed on a 25:75 profit and loss ratio. Further, the partners arrive at the following agreements: • M's inventory is undervalued by P11,000 • Allowance for doubtful accounts is to be set up in the books of M and O at 10% of the AR balances (M P27,500 and O P41,250) Accrued salaries of P20,250 was not recognized in the books of . How much cash should M invest/(withdraw) so that their capital interest would be equal to their P/L ratio? 95,000 133,250 O (133,250) (95,000)

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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