Reference no: EM132318938
Question
On the 1 July 2018, Angie, Bob and Chloe decided to form a partnership. Angie contributed cash and inventory. She contributed $70,000 in cash. The inventory was originally purchased for $40 000. The net realisable value of inventory is $45 000. Bob contributed a vehicle with a fair value of $80 000. The cost of the vehicle is $125 000 and the Accumulated Depreciation $50,000. Chloe contributed equipment that was originally purchased for $250,000 and had been depreciated for $50,000. The fair value of the equipment was $160 000 and a corresponding loan of $100 000.
The following has been agreed among partners:-
- Interest on drawings at 8 percent.
- $5 000 salary to Angie, a $3 000 salary to Chloe.
- 8% interest on their investments,
At the end of financial year, 30 June 2019 the business earned net profit $600. The capital of drawing accounts of the partners showed the following figures:
- Angie's capital $120 000; drawing $10 000
- Bob's capital $ 90 000; drawing $ 8 000
- Chloe' capital $ 70 000; drawing $ 5 000.
Prepare the general journal entries necessary to record the initial investments by respective partners.