PARTNERSHIP FORMATION, OPERATION, & DISSOLUTION On June 1, 2014. A and B formed a partnership with cash investments of P1,155,000 and P1,470,000, respectively. Upon formation, the partners agreed to bring their capital ratio in proportion with their profit and loss ratio which is 30% to A and 70% to B and partner B is to invest or withdraw sufficient amount of cash to conform with the agreement. Profit allocation were as follows: monthly salaries to A amount to P126,000 and to B amount to P105,000. The partners will be allowed with interest of 12% of their capital balances at the end of the year (before profit/loss allocation) for the first year and interest of 15% of the beginning capital in excess of P2,520,000 for the subsequent year. B receives a bonus of 20% of net income after deducting the bonus and his salary. Any remainder is based on profit and loss ratio. On August 1, 2014, A invested additional P280,000 cash and withdrew P105,000 on October 1, 2014. On September 1, 2014, B invested additional P168,000 cash and withdrew P63,000 on December 1, 2014. In 2014, the partnership reported net income of P1,575,000 before any deductions and each partner has drawings of P525,000 distributed at year-end against share in net income. Loans due to A as of December 31, 2014 amount to P133,000. On January 1, 2015, C was admitted as a partner by purchasing 1/3 interest of B, paying the selling partner the amount of P966,000. C also invested P805,000 for a 20% interest in capital of the partnership There were no investments/withdrawals during the year. The profit sharing agreement was modified to also include an annual salary to C of P945,000 and C receives a bonus of 15% of net income after deducting the salaries. The profit and loss ratios were also revised to 24%, 56% and 20% for A, B, and C, respectively. During 2015, the partnership resulted to income of P3,780,000 before any deductions and distributed an amount P210,000 higher than last year to each partner during 2015 against share in net income. On January 1, 2016, B sold its interest in the partnership to C for P2,975,000. After which A and C agreed to share annual profits of P3,220,000 in the ratio of 2:3, A and C respectively. During 2016, A and C had additional investments of P315,000 and P210,000, respectively. Each partner received a P840,000 distribution at year end. On January 1, 2017, A decided to retire from the partnership and was paid P3,745,000 cash for his total partnership interest. It was agreed that assets with a book value of P1,015,000 would be adjusted to reflect their fair values of P826,000. Immediately after A's retirement, D invested cash of P3,360,000 for a 30% interest in the partnership. The agreed capital of the partnership is P10,500,000