Reference no: EM132379680

Question

Angelica, Brian and Chloe decided to enter into a partnership agreement as from 1 July 2017 named ABC Partnership. Some of the provisions of which were as follows.

Angelica to contribute $30,000 cash, inventory the fair value of which was $58,500, plant and machinery $368,600, accounts receivable total $24,300.

Brian to contribute $120,000 cash and act as manager for the business at an annual salary of $48,000 to be allocated to him at the end of each year.

Chloe to contribute $16,500 cash, land $90,000, premises $196,000, furniture and fittings $24,500, motor vehicles $31,500. A mortgage of $120,000 secured over the premises was outstanding and the partnership agreed to assume the mortgage.

Profits or losses of the firm to be divided between or borne by Angelica, Brian and Chloe in the proportion of 4:1:2 respectively.

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.

During the year ended 30 June 2018, the income of the partnership total $166,800, and the expenses (excluding interest on capital and drawings and Brian's salary) amounted to $43,000.

Angelica withdrew $12,000 on 1 October 2017 and $8,000 on 1 January 2018; Brian withdrew $4,000 only on 1 April 2018; Chloe withdrew $10,000 on 30 June 2018.

Required

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

Prepare the balance sheet of the partnership immediately after formation.

Prepare the?? Profit Distribution account for the year ended 30 June 2018 using method.