Prepare journal entries to record each partner investment

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Question - On the 1 March 2019 Graham Wood and Kim Hughes formed a partnership. They agreed to share the profits and losses equally. Ms Hughes contributed $25,000 in cash and equipment which cost $155,000 and had a fair value of $130,000. Assets and liabilities assumed by the partnership from Mr Wood's business are shown below at both carrying amount and fair value.

 

Carrying Amount

Fair Value

Cash at Bank

$142,000

$142,000

Accounts Receivable

11,000

9,000

Inventory

12,000

10,100

Accounts Payable

11,000

11,000

Loan Payable

25,000

25,000

During the year ended 30 June 2019, Mr. Wood contributed additional equipment which had a fair value of $20,000. In addition, during the year Ms Hughes withdrew $6,000 and Mr Wood withdrew $9,000 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 $25,000. 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 Graham Wood's equity in the partnership at 30 June 2019.

Reference no: EM133058143

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