Thomas and James, who were operating separate competing businesses, decided on 1 July 2019 to form a partnership by contributing cash, assets and liabilities of their respective businesses. At that date the fair values of the assets and liabilities were as set out below.

Required

(a) Assuming that Thomas and James agree that their capitals should be equal to the fair value of the net assets contributed, prepare general journal entries to record the formation of the partnership.

(b) If Thomas and James agree that their respective capital should be $230 000 each, show the general journal entries to establish the partnership.

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Cash at bank Accounts receivable Inventory Plant and equipment Accounts payable Thomas James $90.000 12000 $100000 7500 45 000 40 000 90 000 70 000 12 500 8000