On June 30, San Mateo and Caballes formed a partnership. The partners agreed to invest equal amounts of capital. San

Mateo invested his proprietorship's assets and liabilities as follows:

San Mateo's

Book Value

Fair Market Value

Accounts Receivable

P72000

P72000

Allowance for Uncollectible Accounts

-

10500

Merchandise Inventory

223400

241000

Prepaid Expenses

17000

17000

Office Equipment

459000

276000

Accumulated Depreciation

153000

-

Accounts Payable

191000

191000

On June 30, Caballes invested cash in an amount equal to the current market value of San Mateo's partnership capital.

San Mateo, the managing partner, would earn two-thirds of partnership profits. Caballes agreed to accept one-third of

the profits.

During the remainder of the year, the partnership earned P450000. The temporary withdrawals of San Mateo and

Caballes were P352000 and P230000, respectively.

Required:

1.

Journalize the partners' initial investment in new set of books.

2.

Prepare the partnership's statement of financial position immediately after its formation on June 30.