Problem 1-2 (A Sole Proprietor and Individual with no existing business) B. Martin has been a sole proprietor for quite a long time and he finally decided to venture into the partnership business with K. Santos. Below are the account balances of Martin prior to the formation of the partnership: Cash P85,000 Accounts receivable 60,000 Allowance for doubtful accounts 4,000 Merchandise inventory 103,000 Equipment 125,000 Accumulated depreciation-Equipment 15,000 Accounts payable 75,000 Martin, Capital ? As agreed, Santos will contribute cash equal to one-half of the capital balance of Martin after taking into account the following adjustments: a. The allowance for doubtful accounts is over set-up by P3,000. b. Merchandise inventory should be valued at P100,000. c. The equipment is under depreciated by P10,000. d. Accounts payable was overstated by P5,000 due to recording of an expense account. Instruction: 1. Compute for the capital account balance of Martin before partnership formation. 2. Prepare the necessary journal entries in the books of Martin. 3. Prepare a journal entry to close the books of Martin. 4. Prepare the journal entries to record the contribution of Martin and Santos in the books of the partnership. 5. Prepare a statement of financial position after the partnership formation