On 1 March 2019 Dana Frost and Bill Horton formed a partnership. They agreed to share the profits and losses in the ratio of 3:2. Ms. Frost contributed $50,000 in cash and office equipment which cost $70,000 and had a fair value of $100,000. Assets and liabilities assumed by the partnership from Mr. Horton’s business are shown below at both carrying amount and fair value.

	Carrying Amount	Fair Value
Cash at Bank	$33,000	$33,000
Accounts Receivable	15,000	14,000
Inventory	14,700	10,200
Machinery	93,000	99,000
1-year Debentures	11,000	11,000
Loan Payable	20,000	20,000

During the year ended 30 June 2019, Ms. Forest contributed an additional $8,000 in cash. In addition, during the year Mr Horton withdrew $5,000 and Ms Forest withdrew $6,000 in anticipation of the partnership making profits for the year ended 30 June 2019. However, for the year ended 30 June 2019 the partnership made a net loss of $22,000. No interest was charged on the partner's withdrawals and no retained earnings accounts are used by the partnership.

Narrations are not required for the journal entries.

Required:

a) Prepare the journal entries to record each partner’s initial investment at 1 March 2019

b) Determine the balance of Bill Horton's equity in the partnership at 30 June 2019

Answer rating: 100% (QA)

a Journal Entries to record each partners initial investment All entries are recorded at fair value ... View the full answer