Reference no: EM132759408

Question - The partnership agreement of Pangilinan, Gumban and De Guzman provided that profits are to be divided as follows:

1) Pangilinan is to receive a salary allowance of 100,000 for managing the business.

2) Partners are to receive 10% interest on average capital balances.

3) Remaining profits are to be divided in the ratio of 30:30:40 to Pangilinan, Gumban and De Guzman, respectively.

Pangilinan had a capital balance of 600,000 at January 1, 2019 and had drawings of 80,000 during the year. Gumban's capital balance on January 1, 2019 was 900,000 and invested an additional 300,000 on September 1, 2019. De Guzman's beginning capital balance was 1,100,000 and she withdrew 100,000 on July 1 but invested an additional 200,000 on October 1, 2019.

The partnership had a loss of 120,000 during the year. The bookkeeper allocated the loss as follows: 2,000 to Pangilinan; (48,000) to Gumban and (74,000) to De Guzman.

Required -

1) Prepare the schedule to allocate the 120,000 loss correctly.

2) Prepare the statement of changes in partner's equity.

3) Prepare the correcting journal entry at December 31, 2019 assuming that the books have been closed.