Exercise No. 1: True or False. Instruction: Write True if the statement is correct and False if the statement is incorrect. 1. A partnership agreement may validly stipulate that one partner shall receive no share in profits or losses. 2. The basis for distribution of profits or losses is a matter of agreement among the partners. It may be based on their capital contribution ratio. 3. The income summary account is credited in the entry to record distribution of profits. 4. In the absence of a specific agreement, the law requires that partnership profits be divided equally among partners. 5. The basis on which profits or losses are shared is a matter of agreement among the partners and may not necessarily be the same as their capital contribution ratio. 6. Under the capital ratio plan of allocating profits, the partner who invested more capital will ultimately shoulder a bigger share of the loss. 7. When a loss is closed into the partners' capital accounts, income summary is credited. 8. It is possible to allocate profit or loss to partners based solely on average capital balances. 9. The industrial partner is not liable for losses because he cannot withdraw the work or labor already done by him. 10. In the absence of stipulation, the share of each partner in profit and losses shall be in the same proportion to what he may have contributed, but the industrial partner may not bee liable for the losses. Exercise No. 2: Problem Solving. 1. Ables and Galang divide partnership profits and losses solely on the basis of their average capital balances. Ables had P275,000 invested during all of 2019; Galang had P200,000 invested from January 1 to August 31, and he invested another P75,000 on September 1. If profit was P800,000 during 2019, how much should each partner receive and provide the necessary journal entry. 2. Abad, Aglugub, and Onate agreed to share profits and losses according to the ratio of their respective investments at the beginning of the year of P300,000, P250,000, and P450,000. Calculate the share of each partner and provide the necessary journal entries under the following conditions: (a)P270,000 profit; (b)P240,000 loss.