Thomas and James, who were operating separate competing businesses, decided on 1 July 2015 to form a partnership by contributing cash, assets and liabilities of their respective businesses. At that date the fair values of the assets and liabilities were as set out below:

	Thomas			James
Cash at bank Accounts receivable Inventory Plant and equipment Accounts payable	$	90 000 12 000 45 000 90 000 12 500		$	100 000 7 500 40 000 70 000 8 000

Required

A.    Assuming that Thomas and James agree that their capitals should be equal to the fair value of the net assets contributed, prepare general journal entries to record the formation of the partnership.

B.    If Thomas and James agree that their respective capitals should be $230 000, show the general journal entries to establish the partnership.