Partnerships (Please answer section A and B)

a) Sam Smith and Chris Jones are lawyers specialising in different areas of the law. They operate as a partnership using the name Smith & Jones. As their accountant, you have been provided with the following information:

• The partnerships profit for the year ended 31 March 2019 was $572,000, prior to allocating any amounts to the partners.
• The opening capital and current account balances were:

Capital account Smith (1 April 2018)	$600,000 Cr
Capital account Jones (1 April 2018)	$400,000 Cr
Current account Smith (1 April 2018)	$75,500 Cr
Current account Jones (1 April 2018)	$65,400 Cr

• The partnership agreement sets out that interest of 4% is to be paid, by way of a credit to current accounts, on the partners original capital contributions. No interest is paid or charged on current accounts.
• During the financial year ended 31 March, 2019 Smith took drawings of $290,000 and Jones took drawings of $260,000.
• Smith is paid a $120,000 annual salary and Jones is paid a $150,000 annual salary. The salaries should be credited to their respective current accounts.
• The remainder of the profit/loss is to be split in proportion to the original capital contributions.

• Tasks

Prepare the following statements/accounts for Smith & Jones for the year ended 31 March 2019:

1. An appropriation statement.
2. The current account for Smith.
3. The statement of changes in equity.

b) Because of the pressure of work, Sam and Chris have decided to invite their colleague Bill Brown to join the partnership from 1 April 2019. They estimate the goodwill of Smith & Jones at that date to be $90,000. It is to be split between the partners in proportion to their original capital.

Task:

Prepare a journal entry to account for the goodwill before Bill joins the partnership. Narrations are required.