8.21Formation and allocation of profits method 1

LO5, 7, 8

On 1 October 2019, Dallas Lucas and Suzanne Foreman formed a partnership. Some business assets and the liabilities of Lucas were assumed by the partnership; these are listed below at both carrying amounts and fair value.

Carrying amount

Fair value

Cash at bank

$28000

$28000

Marketable securities

24000

26800

Accounts receivable

47000

47000

Inventory

122600

125400

Equipment

38500

230000

Accounts payable

36000

36000

Foreman contributed a building worth $820 000, land worth $350 000, and a $456 000 mortgage was taken over by the partnership. They agreed to share profits and losses in the ratio of1:2. During the first year of the partnership, Lucas invested $60 000 in the business and withdrew $45 000. Foreman invested $115 200 and withdrew $17 200. The partnership had a profit of $88 460. Retained Earnings accounts are not used.

Required

1. Prepare the general journal entries to record the initial investments of both partners (ignore GST).
2. Prepare balance sheet as at 1 October 2019.
3. Prepare statement of changes in partners' equity for the year ended 30 September 2020.