PROBLEM 2 Carmilla and Cecilion are forming a partnership by combining their businesses. Their books show the following:

Carmilla Cecilion

Cash 72,000 30,000 Account receivable 150,000 108,000 Merchandise inventory 240,000 156,000 Furnitures and fixtures 330,000 102,000 Prepaid expenses 63,000 21,000 Accounts payable 366,000 144,000 Carmilla, capital 489,000 Cecilion, capital 273,000

It has been agreed to recognize uncollectible accounts of P7,500 and P5,400 to each party, respectively and that the furniture and fixtures of Cecilion are over-depreciated by P9,000. Each partners share of equity is to be equal to the net assets invested.

Required:

1. Prepare the necessary journal entries in each book assuming that they will use a new book in forming the partnership.
2. What is the total capital of Carmilla and Cecilion?