Question
LENI and KIKO created a partnership to own and operate a health-food store. The partnership agreement provided that LENI receive a salary of P10,000 and
LENI and KIKO created a partnership to own and operate a health-food store. The partnership agreement provided that LENI receive a salary of P10,000 and KIKO a salary of P5,000 to recognize their relative time spent in operating the store. Remaining profits and losses were divided 60:40 to LENI and KIKO. respectively. Income for 2019, the first year of operations, of P13.000 was allocated P8,800 to LENI and P4,200 to KIKO.
On January 1, 2020, the partnership agreement was changed to reflect the fact that KIKO could no longer devote any time to the store's operations. The new agreement allows LENI a salary of P 18.000, and the remaining profits and losses are divided equally. In 2020 an error was discovered such that the 2019 reported income was understated by P4,000. The partnership income of P25,000 for 2020 included the P4,000 related to year 2019.
In the reported net income of P25,000 for the year 2013. LENI and KIKO would have:
A. LENI - 17,100.00; KIKO-17,100.00
B. LENI - 21,900.00; KIKO-3,100.00
C. LENI - 3,100.00; KIKO-21,900.00
D. LENI - 12,500.00; KIKO-12,500.00
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