The following adjustments are needed in the books of Cara to establish her interest:

The allowance for doubtful accounts equivalent of 2 % of accounts receivable is to be established The merchandise inventory is to be valued at P 320,000. Prepaid expenses of P 10,400 and accrued expenses of P 6,400 are to be recognized.

Dana invests cash of P 227,280 to give him a one-third interest in the total capital of the partnership.

The capital balance of Cara before admission of Dana is:

a. P 460,240 c. P 422,400

b. P 501,000 d. P 454,560