Reference no: EM132641327

On October 31,2019. Payton and Allen formed a partnership called Beyond the Arc with each partner contributing the following items at cost:

                        Payton               Allen

Cash           P100,000            50,000
Building 400,000
Inventory 200,000
Mortgage Payable 200,000
Accounts Payable 150,000

The partners agreed that the building and inventory should be recorded at fair value of P500,000 and P300,000 respectively. They have also agreed that the capital interests would be equal through the bonus method. Profit sharing will also be equal between the two partners.

Problem 1: At what amount will each partner's capital be recorded upon formation?

a. Payton - P400,000; Allen - P200,000
b. Payton - P300,000; Allen - P100,000
c. Payton - P200,000; Allen - P200,000
d. Payton - P300,000; Allen - P300,000