On 1 August 20x0, L. Challen and A. Wanyezi formed Technical Services CC to repair TV sets. It was agreed that profits and losses would be shared equally by the two members.

These members’ transactions in relation to the CC took place during the first year of operation:

• On 1 August 20x0, each member agreed to make a capital contribution of R25 000.

– Challen would contribute cash, whereas Wanyezi would contribute a vehicle valued at R12 000 and the balance in cash.

– Wanyezi would pay his contribution immediately, whereas Challen would pay half the amount immediately and the balance on 31 October 20x0.

– Challen and Wanyezi agreed that the services that each rendered before the formation of the business should be valued at R5 000. These amounts would be paid as a bonus on 1 August 20x1.

– Challen brought spares valued at R15 000 into the business. This is not to be regarded as a capital contribution.

• On 30 September, Wanyezi advanced a three-year loan of R18 000 at an interest rate of 15% per annum to the business. Interest is to be calculated and capitalised annually on 30 June.

• On 31 October, Challen paid the balance of his capital contribution.

• On 2 January 20x1, the CC made a loan to Challen of R10 000.

• On 1 February, the members agreed on advice from their accountant to convert their capital contribution to loans, except for R1 000. An Amended Founding Statement was submitted to the Registrar.

• On 31 March, the members agreed that each would receive a monthly salary of R3 000 from April 20x1, payable on the last day of each month.

– It was also agreed that, with retrospective effect, interest should be calculated at 20% per annum on members’ long-term loan balances at the beginning of, and halfway through, each financial year.

– This interest should be credited to the members’ respective long-term loan accounts.

• On 30 June, each member received a R7 500 distribution of profits.

• On 31 July, net income before members’ salaries and interest amounted to R100 000. Taxation should be provided at 28%. A total distribution of R20 000 payable in August 20x1 was approved by the members.

For loans to and from members, the association agreement specifies that a short-term and a long-term loan account should be maintained for each member. Furthermore, loans bearing specific interest and repayment terms, such as the loan advanced by Wanyezi on 30 September 20x0, should be disclosed separately.

You are required to

1. Prepare journal entries for each of the transactions.

2. Prepare the statement of members’ net investment and the statement of members’ transactions at 31 July 20x1, the financial year end of the business.