PROBLEM 1

A, B, C and D established a publishing company on January 2, 2018 that they operate as a partnership. The partnership agreement includes the following:

NET INCOME = 100,000

a.A receives a salary of P20,000 and a bonus of 3% of income after all bonuses.

b.B receives a salary of P10,000 and a bonus of 2% of income after all bonuses.

c.All partners are to receive 10% interest on their average capital balances.

The average capital balances are as follows: A - P50,000; B - P45,000; C - P20,000 and D - P42,000. Any remaining profits and loss are to be divided equally among the partners.

Required:

1.Allocate the net income (loss) to the partners.

2.Prepare the Statement of Changes in Capital.