Answered: On May 1, Rose, and Yana 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, Rose, and Yana formed a partnership and agreed to share profits and losses 1:3 respectively. Rose contributed a parcel of land with a fair market value of P1,000,000. Yana contributed P3,000,000 cash. On May 1, immediately after formation of partnership, the land was sold for P1,100,000. WHat amount should be recorded in Rose's capital account on formation of the partnership?

a. P1,000,000

b. P1,050,000

c. P1,100,000

d. P1,025,000

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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