Whitney, Wesley and Wiseman who were independent business owners decided to form a partnership as...
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Accounting
Whitney, Wesley and Wiseman who were independent business owners decided to form a partnership as at 1 January 2019. The partnership agreement sets out the following terms: Whitney to contribute $30,000 accounts receivable, plant and equipment valued at $60,000, and accounts payable of 40,000. Wesley to contribute $20,000 cash and to act as manager for the partnership at an annual salary of $24,000. Wiseman to contribute $10,000 accounts receivable and land and buildings valued at $300,000 with a mortgage of $250,000. Interest to be allowed at 5% p.a. on the capital contribution by each partner. Interest is not to be charged on partners' drawings. Residual profits or losses to be shared equally among three partners. Required a) Prepare journal entries necessary to open the records of the partnership as at 1 January 2019. (5 marks) b) Assuming in the first year that the partnership makes a profit of $80,000, prepare the journal entries to record the allocation of profit for the year ended 31 December 2019. Retained Earnings accounts are not used. (3 Marks). Ignore GST and narrations are NOT required
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