CELSO and JOSHUA created a partnership to own and operate a health-food store. The partnership...
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CELSO and JOSHUA created a partnership to own and operate a health-food store. The partnership agreement provided that CELSO receives an annual salary of P4,800 and JOSHUA a salary of P2,400 to recognize their relative time spent in operating the store. Remaining profits and losses were divided 60:40 to CELSO and JOSHUA, respectively. Income of P6,240 for 2020, the first year of operations, was allocated P4,224 to CELSO and P2,016 to JOSHUA. On January 1, 2021, the partnership agreement was changed to reflect the fact that JOSHUA could no longer devote any time to the store's operations. The new agreement allows CELSO a salary of P8,640, and the remaining profits and losses are divided equally. In 2021 an error was discovered such that the 2020 reported income was understated by P1,920. The partnership income of P12,000 for 2021 included this P1,920 related to 2020.
1. In the reported net income of P12,000 for the year 2021, CELSO would have
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