32. On January 1, 20x5, DD and EE decided to form a partnership. At the endof the year, the partnership made a net income of P120,000. The capitalaccounts of the partnership show the following transactions.DD, CapitalCr.EE, CapitalDr.Dr.Cr:O P25,000P40,000January 1April 1.June 1August 1September 1October 1December 1P5,000 -- 10,00010,000P3,0001,0005,0004,0005,000Scanned with CamScannerAssuming that an interest of 20% per annum is given on average capitaland the balance of the profits is allocated equally, the allocation of profitsshould be:DD, P60,000; EE, P59,400b. DD, P61,200; EE, P58,80ODD, P67,200; EE, P52,800d.DD, P68,800; EE, P51,200a.C.(PhilCPA)33. The partnership of DD and BB was formed and commenced operations onMarch 1, 20x5, with DD contributing P30,000 cash and BB investing cash ofP10,000 and equipment with an agreed upon valuation of P20,000. OnJuly 1, 20x5, BB invested an additional P10,000 in the partnership, DD madea capital withdrawal of P4,000 on May 2, 20x5 but reinvested the P4,000on October 1,20x5. During 20x5, DD withdrew P800 per month and BB, themanaging partner, withdrew P1,000 per month. These drawings werecharged to salary expense. A preclosing trial balance taken at December31, 20x5 is as follows:DebitCreditP 9,000CashReceivable - netEquipment – net.Other assetsLiabilities ..DD, capital.BB, capitalService revenueSupplies expenseUtilifies expense.Salaries to partners ..Other miscellaneous expenses15,00050,00019,000P 17,00030,00040,00050,00017,0004,00018,0005,000TotalP137,000 P137,000Compute for the share of DD and BB in the partnership net incomeassuming monthly salary allowances P800 and P1,000 for DD and BB,respectively; interest allowance at a 12% annual rate on average capitalbalances; and remaining profits allocated equally.DD, P10,520; BB, P13,480C.D, P10,800; BB, P13,200а.b.DD, P12,000; BB, P12,000d.DD, P10,600; BB, P13,400(Adapted)

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Answered: 32. On January 1, 20x5, DD and EE…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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