Reference no: EM133000002

On 1 October 2018, Mr. Lucas and Mr. Sami formed a partnership. Some business assets and the liabilities of Lucas were assumed by the partnership, and these are listed below at both carrying amounts and fair value.

                                  Carrying amount                   Fair value

Cash at bank                    $28,000                           $28,000

Marketable securities                 24,000                   26,800

Accounts receivables                   47,000                    47,000

Inventory                               122,600                      125,400

Equipment                                 38,500                        230,000

Accounts payables                      36,000                           36,000

Sami contributed a building worth $820,000, land worth $350,000, and a $456,000 mortgage was taken over by the partnership. They agreed to share profits and losses in the ratio of 6:4. During the first year of the partnership, Lucas invested an additional $60,000 in the business and withdrew $45,000. Sami invested an additional $115,200 and withdrew $17,200. The partnership had a profit of $88,460. Retained Earnings accounts are not used.

Required:

Problem i) Provide the general journal entries to record the initial investments of both partners (ignore GST).

Problem ii) Provide a statement of changes in partners' equity for the year ended 30 September 2019.

Problem iii) 'There is really no need for a partnership agreement since all issues likely to arise among partners are adequately covered in the appropriate Partnership Act.' Discuss.