Answered: PP, RR and SS are new CPA’s and are to…

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter19: Deferred Compensation

Section: Chapter Questions

Problem 1RP

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PP, RR and SS are new CPA’s and are to form a partnership. PP is to contribute cash of
P50,000 and his computer originally costing P60,000 but has a second-hand value of
P25,000. RR is to contribute cash of P80,000. SS, whose family is selling computers, is to
contribute cash of P25,000 and a brand-new computer with a regular selling price of P60,000 but which cost is P50,000. Partners agree to share profits equally. The capital
balances upon formation are:
PP RR SS
a. P 75,000 P80,000 P85,000
b. P110,000 P80,000 P75,000
c. P 80,000 P80,000 P80,000
d. P 83,333 P83,333 P83,334

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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