KATY, a sole proprietor wanted to expand her profitable business but she does not have enough resources. So, she thought of inviting PERRY to join her and formed a partnership on April 1, 2020. Just before admission, KATY had the following assets and liability accounts: Cash - 420,000; Accounts receivable -380,000; Inventories -250,000;Notes payable -100,000. PERRY agreed to contribute cash equal to 30% of KATY's capital after considering the following adjustments: (a) 2% allowance for bad debts should be recognized, (b) the inventories have fair market value equal to 120% of the balance.

1.How much is the adjusted capital of Katy?

A. 992,400

B. 1,242,400

C. 950,000

D. 1,007,600

2.How much should Perry contribute to the partnership?

A. 302,280

B. 297,720

C. 372,720

D. 285,000

3.How much is the total assets of the partnership after the formation?

A. 1,389,080

B. 1,357,600

C. 1,342,400

D. 1,390,120