Prepare the statement of changes in partners equity

Assignment Help Financial Accounting

Reference no: EM132833272

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

Pangilinan is to receive a salary allowance of P100,000 for managing the business.

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

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 P600,000 at Jan. 1, 2018 and had drawings of P80,000 during the year. Gumban's capital balance on Jan. 1, 2018 was P900,000 and invested an additional P300,000 on Sept. 1, 2018. De Guzman's beginning capital balance was P1,100,000, and she withdrew P100,000 on July 1 but invested an additional P200,000 on Oct. 1, 2018.

The partnership had a loss of P120,000 during the year. The bookkeeper allocated the loss as follows: P2,000 to Pangilinan; P(48,000) to Gumban and P(74,000) to De Guzman.

Required -

1. Prepare the schedule to allocate the P120,000 loss correctly.

2. Prepare the statement of changes in partners' equity.

3. Prepare the correcting journal entry at Dec. 31, 2018 assuming that the books have been closed.

Reference no: EM132833272

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