As of July 1, 2020, MM and AA decided to form a partnership. Their balance sheets on this date are: MM AA Cash P 15,000 P 38,000 Accounts Receivable 680,000 255,000 Allowance for doubtful accounts (140,000) (30,000) Merchandise Inventory - 202,000 Machinery and Equipment 150,000 270,000 Total P705,000 P735,000 Accounts Payable 135,000 240,000 MM, capital 570,000 AA, capital - 495,000 Total P705,000 P735,000 The partners agreed that the machinery and equipment of MM is under depreciated by P15,000 and that of AA by P45,000. Allowances for doubtful accounts is to be set up amounting to P120,000 for MM and P40,000 for AA. The partnership agreement provides for the profit and loss ratio and capital interest of 60% to MM and 40% to AA with AA’s capital as base. How much cash must MM invest to bring the partner's capital balances proportionate to their profit and loss ratio?
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is 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, drawings of a partner, etc.
As of July 1, 2020, MM and AA decided to form a
| MM | AA | |
| Cash | P 15,000 | P 38,000 |
| 680,000 | 255,000 | |
|
Allowance for doubtful accounts |
(140,000) | (30,000) |
|
Merchandise Inventory |
- | 202,000 |
|
Machinery and Equipment |
150,000 | 270,000 |
|
Total |
P705,000 | P735,000 |
|
|
||
| Accounts Payable
|
135,000 | 240,000 |
| MM, capital | 570,000 | |
| AA, capital | - | 495,000 |
| Total | P705,000 | P735,000 |
The partners agreed that the machinery and equipment of MM is under depreciated by P15,000 and that of
AA by P45,000. Allowances for doubtful accounts is to be set up amounting to P120,000 for MM and
P40,000 for AA. The partnership agreement provides for the
60% to MM and 40% to AA with AA’s capital as base.
How much cash must MM invest to bring the partner's capital balances proportionate to their profit and loss ratio?
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