Reference no: EM132736292

Question: Barb Jones and Rama Floyd formed a partnership on 1 July 2019. The partners agreed to invest equal amounts of capital. Barb invested her proprietorship's assets and liabilities (credit balances in parentheses) as follows:

Barb Jones        Current Market Value         Accounts receivable

                                 14 000                          14 000

Inventory                    49 000                         45 000

Prepaid expenses          6 400                           6 400

Office equipment          45 000                         40 000

Accounts Payable         (25 000)                      (25 000)

On 1 July, Rama Floyd invests cash in an amount equal to the current market value of Barb Jones partnership capital. The partners had decided that Barb will earn 70% of partnership profits because she will manage the business. Rama agreed to accept 30% of the profits. During the period ended 30 June, the partnership earned a profit of $75 000. Barb Jones's drawings were $42 000 and Rama Floyd's drawings totalled $22 000.

Required: a) Journalise the partners' initial investments.

b) Prepare the partnership balance sheet immediately after its formation on 1July 2019.

c) Journalise the closing of the Income summary and partner Drawings accounts on 30 June 2020.