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On January 1, FRED and GEMMO formed a partnership by contributing cash of P405,000 and...

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Accounting

On January 1, FRED and GEMMO formed a partnership by contributing cash of P405,000 and P270,000, respectively. On February 1. Fred contributed an additional P135,000. On May 1, Gemmo contributed machinery with a fair market value of P90,000 and a net book value of P75,000 when contributed. On November 1 Gemmo contributed an additional P45,000 cash to the partnership.

The partnership reported a net income of P257,400 for the year and the profit or loss agreement are as follows:

  • Interest at 6% is allowed on average capital balances;
  • Salaries if P2,700 per month to each partner;
  • Bonus to Fred of 10% of net income after interest, salaries and bonus; and
  • Balance to be divided in the ratio of 6:4 to Fred and Gemmo, respectively.

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