1. Straight Problem. (40 pts)

The statement of financial position of Rozen Elizalde on October 1, 2021, before accepting Azi Montefalco as a partner is as follows:

Rozen Elizalde Statement of Financial Position

October 1, 2021

Assets		Liabilities and Equity
Cash	P60,000	Notes Payable	P40,000
Notes Receivable	30,000	Accounts Payable	100,000
Accounts Receivable	240,000	Elizalde, Capital	314,000
Allowance for Uncollectible Accounts	(10,000)
Merchandise Inventory	80,000
Furniture and Fixtures	60,000
Accumulated Depreciation	(6,000)
Total Assets	P454,000	Total Liabilities and Equity	P454,000

Azi Montefalco offered to invest cash to get a capital credit equal to one-half of the Rozen Elizaldes capital after giving effect to all the adjustments below. Rozen accepted the offer.

1. Merchandise inventory is to be valued at P74,000.
2. The accounts receivable is 95% collectible.
3. Accrued interest on notes receivable is to be recognized amounting to P10,000.
4. Accrued expenses of P2,500 are to be recognized.
5. The furniture and fixtures are to be valued at P46,000.

Required:

Assuming that the partnership will use a new book, prepare the following:

• Journal entries showing the adjustments to be made.
• Closing entries for the books of the sole proprietorship.
• Journal entries to record the formation of the business.
• Balance Sheet of the new partnership.