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How much cash should gordon invest

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Reference no: EM132937399

Gordon and Fernando sole proprietorships decided to form a partnership on June 1, 2011. The partnership will take over their assets and assume their liabilities. As of June 1, 2011, the net assets of Gordon and Fernando are P220,000 and P309,375, respectively. The partners agreed on a 25:75 profit and loss ratio.

Furthermore, the partners arrive on the following agreements to revalue their assets and liabilities:

  • Gordon's inventory is undervalued by P11,000.
  • An allowance for doubtful account is to be set up in the books of Gordon and Fernando in the amount of P2,750 and P4,125, respectively.
  • Accrued expenses of P20,250 was not recognized in Fernando's books.

Problem 1: How much cash should Gordon invest (withdraw) so that their capital interest would be equal to their profit and loss ratio.

a. P(133,250)

b. P 133,250

c. P( 95,000)

d. P 95,000

Reference no: EM132937399

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