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

October 1, 2019
ASSETS LIABILITIES AND EQUITY
Cash P60,000 Notes Payable P40,000
Notes Receivable 30,000 Accounts Payable 100,000
Accounts receivable 240,000 Leopoldo Medina, Capital 314,000
Allowance for uncollected (10,000)
accounts
Merchandise inventory 80,000
Furniture and fixtures 60,000
Acc. Depreciation (6,000)
TOTAL ASSETS P454,000 TOTAL LIABILITIES AND P454,000
EQUITY

Challoner Matero offered to invest cash to get a capital credit equal to one-half of the Leopoldo Medina’s capital
after giving effect to the adjustment below. Medina accepted the offer.

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