Reference no: EM132749116

Question - Richard, barry and Andrew decided to enter into a partnership agreement as from 1st July 2018, some of the provisions of which were as follows.

1. Richard to contribute $24000 cash, inventory the fair value of which was $51000, plant and machinery $94320, accounts receivable totalling $15240

2. Barry to contribute $45000 cash and act as manager for the business at an annual salary of $38000 to be allocated to him at the end of each year.

3. Andrew to contribute $19800 cash, land $144000, premises $288000, furniture and fittings $48600, and motor vehicles $37800. A mortgage of $216000 secured over the premises was outstanding and the partnership agreed to assume the mortgage.

4. Profits or losses of the firm to be divided between or borne by Richard, barry and Andrew in the proportion of 2:1:3 respectively.

5. Interest to be allowed at 8% p.a. on the capital contribution by the partners. Interest at 10% p.a. to be charged on partners' drawings.

6. During the year ended 30 June 2019, the income of the partnership totaled $144960, and the expenses (excluding interest on capital and drawings and Barry's salary) amounted to $51600.

7. Richard withdrew $14400 on 1 October 2018 and $9600 on 1 January 2019; Barrie withdrew $4800 only on 1 April 2019; Andrew withdrew $12000 on 30 June 2019.

Required -

1. Prepare general journal entries necessary to open the records of the partnership.

2. Prepare the balance sheet of the partnership immediately after formation.

3. Prepare Profit Distribution account for the year ended 30 June 2019.