X, Y & Z formed a partnership. X contributed cash of ₱400,000 while Y contributed an equipment costing ₱700,000 with a current fair value of ₱300,000 and Z contributed cash of ₱100,000 and accounts receivable of ₱250,000 with a bad debt of ₱50,000. The partnership agreement stipulates the following: 1.      Annual salary allowances of X, Y & Z of ₱50,000, 40,000 & 30,000 respectively.

2.      10% bonus to X after salaries.

Case 1: The partnership earned profit of ₱250,000.

Case 2: The partnership earned profit of ₱80,000.

 

Requirements: Based on the cases given above prepare the following requirements for each case:

a.       Determine the correct valuations of the partners’ contributions and provide the journal entry to record the initial investment of the partners. (one solution only for case 1 & 2)

b.      Compute for the respective shares of each partners in the profit. (2 solutions: case 1 & case 2)

c.       Prepare closing entry for the income summary. (2 solutions: case 1 & case 2)