On 1 July 2019, Sandra and George decided to amalgamate their businesses and start a partnership,...

  

Transcribed Image Text:

On 1 July 2019, Sandra and George decided to amalgamate their businesses and start a partnership, called Sandra and George Consulting Services. Their previous businesses financial information at that commencement of the partnership was: Sandra George Capital Accounts payable %24 101 500 113 800 52 350 61 300 Bank overdraft 7430 $ 161 280 $ 175 100 Cash at bank $ 49 560 Accounts receivable $ 56 100 53 240 Inventory Furniture and fittings Equipment Accumulate Depreciation-Equipment 41 680 72 300 27 270 46 970 (10.740) $ 161 280 175 100 At 1 July 2019, Sandra's accounts receivable and inventory had fair values of $55 000 and $39 503 respectively, and George's accounts receivable and inventory had fair values respectively of $46 140 and $70 000. Sandra's Furniture was just purchased on 1 July 2019 and the fair value was equal to its carrying amount and the equipment fair value was 10% lower than its carrying amount. The following details were included in the partnership agreement; Sandra and George negotiated to have equal capital balances of $120 000. • The end of the financial year to be 30 June. • The interest on advances to be 7% and would be recorded as payable by the end of financial year. The profit or loss to be allocated as follows; 1. A salary of $10,000 per year for Sandra and $35,800 for George. 2. Interest of 6% to be allowed on the ending balance of capital 3. Interest of 10% to be charged on partners' drawings 4. The residual profit or loss to be divided or borne by George and Sandra in the proportion of 2:3 respectively. After 2 years of operation, at the end of the financial year, the trial balance for the Sandra and George Consulting Services is as follows; Sandra and George Consulting Services Trial Balance As at 30 June 2021 Debit Credit Cash at Bank 112,300 Accounts Receivable 118,100 Prepaid Insurance 86,800 Inventory 113,400 Equipment 149,800 Accumulated Depreciation- Equipment 13,000 Goodwill 40,000 Accounts Payable Advance, Sandra 85,900 171,500 98,500 Sandra, Capital George, Capital Sandra Drawings George, Drawings 190,800 51,200 43,900 Sandra, Retained Earnings George, Retained Earnings Professional consulting services 78,000 41,500 170,500 Operating expense Rent expense Office expenses Insurance expense 85,200 31,500 7,500 6,500 3,500 Depreciation expense Total 849,700 849,700 Sandra made her advance on 1 September 2020 and is due for payment by 1 June 2022. Sandra and George each withdrew $15,000 on 1 November 2020; $17,000 on 1 January 2021; and the remainder on 31 March 2021. Required a) Prepare the general journal entries to record the initial investment of both partners on 1 July 2019. b) Prepare a schedule showing the distribution of the final balance in the profit and loss summary account to each partner, as at 30 June 2021 (based on the above agreed terms). c) Prepare the necessary general journal entries to close the profit and loss summary account and to distribute the profit to Sandra and George using method 2, as at 30 June 2021 (based on your answer in part b). d) Prepare a detailed statement of financial position as at 30 June 2021 (based on your answers from part e). It must classify assets and liabilities based on their liquidity. Instructions: • You are required to have a sheet, at least, for each requirements' parts or some of the parts answers can be combined. Remember that the purpose is to have a clear model. • Workings and calculations are to be shown, where it is necessary. • Don't forget a sheet for self reflection. On 1 July 2019, Sandra and George decided to amalgamate their businesses and start a partnership, called Sandra and George Consulting Services. Their previous businesses financial information at that commencement of the partnership was: Sandra George Capital Accounts payable %24 101 500 113 800 52 350 61 300 Bank overdraft 7430 $ 161 280 $ 175 100 Cash at bank $ 49 560 Accounts receivable $ 56 100 53 240 Inventory Furniture and fittings Equipment Accumulate Depreciation-Equipment 41 680 72 300 27 270 46 970 (10.740) $ 161 280 175 100 At 1 July 2019, Sandra's accounts receivable and inventory had fair values of $55 000 and $39 503 respectively, and George's accounts receivable and inventory had fair values respectively of $46 140 and $70 000. Sandra's Furniture was just purchased on 1 July 2019 and the fair value was equal to its carrying amount and the equipment fair value was 10% lower than its carrying amount. The following details were included in the partnership agreement; Sandra and George negotiated to have equal capital balances of $120 000. • The end of the financial year to be 30 June. • The interest on advances to be 7% and would be recorded as payable by the end of financial year. The profit or loss to be allocated as follows; 1. A salary of $10,000 per year for Sandra and $35,800 for George. 2. Interest of 6% to be allowed on the ending balance of capital 3. Interest of 10% to be charged on partners' drawings 4. The residual profit or loss to be divided or borne by George and Sandra in the proportion of 2:3 respectively. After 2 years of operation, at the end of the financial year, the trial balance for the Sandra and George Consulting Services is as follows; Sandra and George Consulting Services Trial Balance As at 30 June 2021 Debit Credit Cash at Bank 112,300 Accounts Receivable 118,100 Prepaid Insurance 86,800 Inventory 113,400 Equipment 149,800 Accumulated Depreciation- Equipment 13,000 Goodwill 40,000 Accounts Payable Advance, Sandra 85,900 171,500 98,500 Sandra, Capital George, Capital Sandra Drawings George, Drawings 190,800 51,200 43,900 Sandra, Retained Earnings George, Retained Earnings Professional consulting services 78,000 41,500 170,500 Operating expense Rent expense Office expenses Insurance expense 85,200 31,500 7,500 6,500 3,500 Depreciation expense Total 849,700 849,700 Sandra made her advance on 1 September 2020 and is due for payment by 1 June 2022. Sandra and George each withdrew $15,000 on 1 November 2020; $17,000 on 1 January 2021; and the remainder on 31 March 2021. Required a) Prepare the general journal entries to record the initial investment of both partners on 1 July 2019. b) Prepare a schedule showing the distribution of the final balance in the profit and loss summary account to each partner, as at 30 June 2021 (based on the above agreed terms). c) Prepare the necessary general journal entries to close the profit and loss summary account and to distribute the profit to Sandra and George using method 2, as at 30 June 2021 (based on your answer in part b). d) Prepare a detailed statement of financial position as at 30 June 2021 (based on your answers from part e). It must classify assets and liabilities based on their liquidity. Instructions: • You are required to have a sheet, at least, for each requirements' parts or some of the parts answers can be combined. Remember that the purpose is to have a clear model. • Workings and calculations are to be shown, where it is necessary. • Don't forget a sheet for self reflection.

Answer rating: 100% (QA)

C Journal entries in the books of Sandra George Consulting Date Particulars LF Debit C... View the full answer