Richards, David and Andrews decided to enter into a partnership agreement as from 1 July 2019, some of the provisions of which were as follows.

1. Richards to contribute $20 000 cash, inventory, the fair value of which was $42 500, plant and machinery $78 600, accounts receivable totalling $12 700.

2. David to contribute $37 500 cash and act as manager for the business at an annual salary of $32 000 to be allocated to him at the end of each year.

3. Andrews to contribute $16 500 cash, land $120 000, premises $240 000, furniture and fittings $40 500, and motor vehicles $31 500. A mortgage of $180 000 secured over the premises was outstanding and the partnership agreed to assume the mortgage.

4. Profits or losses of the firm to be divided between or borne by Richards, David and Andrews in the proportion of 2:1:3 respectively.

5. 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 2020, the income of the partnership totalled $120 800, and the expenses (excluding interest on capital and drawings and David’s salary) amounted to $43 000.

Richards withdrew $12 000 on 1 October 2019 and $8000 on 1 January 2020; David withdrew  $4000 only on 1 April 2020; Andrews withdrew $10 000 on 30 June 2020.

Required

(a) Prepare general journal entries necessary to open the records of the partnership.

(b) Prepare the balance sheet of the partnership immediately after formation.

(c) Prepare a Profit Distribution account for the year ended 30 June 2020 using method 2.