EXERCISE:

Nadine, a sole proprietor invited Mark and Lark to form a trading partnership. Nadine will invest
her existing business while Mark and Lark will both invest cash and non-cash assets, as follows
(Mark: Cash – 100,000; Merchandise Inventory – 100,000, and Lark: Cash – 100,000; Land –
100,000; and Building – 700,000). The Statement of Financial Position of Nadine Trading on
September 15, 2021 showed the following:

Cash 50,000
Accounts Receivable 220,000
Allowance for Bad Debts 15,000
Merchandise Inventory 575,000
Office Equipment 150,000
Accumulated Depreciation-Office Equipment 50,000
Furniture and Fixture 100,000
Accounts Payable 60,000
Notes Payable 270,000
Nadine, Capital 700,000
The partners agreed that the following adjustments be made in the books of Nadine:
 Merchandise Inventory is to be recorded at its fair value of P550,000.
 10% of the Accounts Receivable is estimated to be uncollectible.
 The office equipment was estimated to have remaining value of P110,000
 The market value of the furniture amount to P120,000.
 Accrued interest on notes of P13,500 should be set up.
Required:
1. Adjust and close the books of Nadine
2. Open the books of the partnership
3. Prepare a statement of financial position