On 1 July 2019, McGregor and Roberts decided to amalgamate their businesses and to share profits equally.

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On 1 July 2019, McGregor and Roberts decided to amalgamate their businesses and to share profits equally. Financial information at that date was as follows.

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At one July 2019, McGregor’s accounts receivable and inventory had fair values of $61 280 and $48 380 respectively, and Roberts’s accounts receivable and inventory had fair values respectively of $46 080 and $73 720. McGregor’s equipment was written down by 10%.

McGregor and Roberts negotiated to have equal capital balances of $150 000.
After one year, the following were the only changes to the assets and liabilities, as compared with the position at the time of forming the partnership.

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Depreciation still has to be charged on the furniture and fittings and on equipment at the rates of 10% and 15% respectively for the year. Cash drawings for the year were: 

McGregor, $28 800;

Roberts, $36 240.

Required

(a) Prepare journal entries to record the formation of the partnership.

(b) Prepare a statement of changes in partners’ equity as at 30 June 2020 showing each partner’s share of profit/loss for the year.

(c) Prepare the balance sheet of the partnership as at 30 June 2020.

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Financial Accounting

ISBN: 9780730363217

10th Edition

Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie, Andreas Hellmann, Jodie Maxfield

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