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.

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.

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.

Transcribed Image Text:

McGregor Capital Accounts payable Bank overdraft $101380 41470 18430 $161280 Cash at bank Accounts receivable Inventory Furniture and fittings Equipment Roberts $119 800 55 300 $175 100 59 900 61280 46 080 46080 69 120 26260 27 660 $161280 $175 100