Accounts payable                                       (62,000)

Unadjusted Capital of Mark                      P264,000

Sub-computation b:
Allowance for doubtful accounts [3% x P120,000]              (P 3,600)
Increase in merchandise inventory                                       25,000
Recognition of Prepaid expenses                                           3,600
Recording of accrued expenses                                           (4,000)
            Net adjustment to capital of Mark                                     P21,000

Total agreed capital is therefore equal to P475,000 (P285,000 ÷ 3/5), 2/5 of this or P190,000 (P475,000 x 2/5) 
belongs to Jimenez which he agreed to provide for in cash.

[20].         Letter “D” is the correct answer.

The Accounts payable                                       (62,000)
Unadjusted Capital of Mark                      P264,000

Sub-computation b:
Allowance for doubtful accounts [3% x P120,000]              (P 3,600)
Increase in merchandise inventory                                       25,000
Recognition of Prepaid expenses                                           3,600
Recording of accrued expenses                                           (4,000)
            Net adjustment to capital of Mark                                     P21,000

Total agreed capital is therefore equal to P475,000 (P285,000 ÷ 3/5), 2/5 of this or P190,000 (P475,000 x 2/5) 
belongs to Jimenez which he agreed to provide for in cash.

[20].         Letter “D” is the correct answer.

The