Ria, Celso, and Mercy agreed to pool together their resources on July 1, 2014, and put up a recording firm. An article of co-partnership was drawn with the following provisions.

a) That the partners contribute cash of P300,000, P400,000, and P500,000, respectively.

b) That they will co-manage the business.

c) That the partners will divide the profits based on contributions after monthly salary allowance of P5,000 for each partner.

d) In the event of retirement or death, partners will be paid six months after the date of death plus accrued interest at 18%. Profit will be computed pro-rata from the start of the year to date of death.

The salary allowances were withdrawn by the partners and at the end of the year, the operation had a net profit of P300,000.

For 2014

a) Prepare entries to record investments, withdrawals, and distribution of net profit,

b) Prepare a statement of changes in partners' equity.

Mercy died on August 2, 2015. And for the year 2015, the partnership earned P350.000 before accruing interest on the Payable to Mercy's Estate". Ria and Celso were able to withdraw their salaries for the year while Mercy's salary was not withdrawn anymore starting in July. On February 2, 2016, Mercy's estate received the amount due from the partnership.

For 2015

a) Close the capital and drawing accounts of Mercy to a payable account.

b) Increase the Payable to Mercy's Estate for a proportionate share in the profit from the start of the year to date of death.

c) Accrue interest and increase the Payable to Mercy's Estate from date of death to the end of the year.

d) Distribute the remaining profit to Ria and Celso.

e) Prepare a Statement of Partners' Equity

For 2016

a) Record the settlement including additional interest.