Reference no: EM132691812
O and M formed the KERN Partnership several years ago. Capital account balances on December 31, 2003, after closing were as follows:
O P500,000
M 280,000
The partnership agreement provides O with an annual salary of P10,000 plus a bonus of 5% of partnership net income for managing the business. M is provided an annual salary of P15,000 with no bonus. The remainder is shared evenly. Partnership net income for 2003 was P30,000. O and M each invested additional P5,000 during the year to finance a special purchase. Year- end drawing account balances were P15,000 for O, and P10,000 for M.
Problem 1: The capital balances of O and M on January 1, 2003 were:
a. P503,250 and P291,750.
b. P505,000 and P290,000.
c. P496,750 and P268,250.
d. P480,000 and P310,000.
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