Answered: On May 1, 2018, Jose and Pedro formed a…

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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Question

On May 1, 2018, Jose and Pedro formed a partnership and agreed to share profits and losses
in the ratio of 3:7, respectively. Jose contributed a computer that cost himP50,000. Pedro
contributed P200,000 cash. The computer was sold for P55,000 on May 1, 2018
immediately after the formation of the partnership. What amount should be recorded in
Jose’s capital account on formation of the partnership?
a. P55,000 b. P51,500 c. P60,000 d. P50,000

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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