On May 1, Nakpil and Baltazar are combining their separate businesses to form a partnership. Cash and noncash assets are to be contributed. Profits and losses are allocated equally.

• The inventory of Baltazar is to be increased by P4,000;
• An Allowance for Doubtful Accounts of P1,000 and P1,500 are to be set up in the books of Nakpil and Baltazar, respectively; and
• Accounts payable of P4,000 is to be recognized in Nakpils books.

The individual trial balances on May, before adjustments, follow:

Nakpil: Assets, P75,000; Liabilities, P5,000:

Baltazar: Assets, P113,000; Liabilities, P34,500.

What is the effect of net adjustments to capital of Nakpil and Baltazar?

Group of answer choices

a) Increase P3,000 to Nakpil, Capital; Increase 5,500 to Baltazar Capital

b) Decrease P3,000 to Nakpil, Capital; Increase 2,500 to Baltazar Capital

c) Increase P5,000 to Nakpil, Capital; Increase 5,500 to Baltazar Capital

d) Decrease P5,000 to Nakpil, Capital; Increase 2,500 to Baltazar Capital