Anand, Amos, and Amanda are independent manufacturers who had been in active competition to one another for some years. They decide to form a partnership, AAA Manufacturing Ltd, as from 1 January 2020. The agreement set out the following basic arrangements:

Anand to contribute $15,000 in cash, machinery valued at $27,000 with a bank loan of $3,000, and debtors of $7,500.

Amos to contribute machinery valued at $15,700 and to act as managing partner at a salary of $22,500 per year.

Amanda to contribute machinery valued at $28,000 and a motor van valued at $15,000.

Interest for the period is to be allowed to partners at the rate of 5% p.a. on beginning capital but is not charged on drawings.

Residual profits or losses to be shared among Anand, Amos, and Amanda in the proportion of 2:1:2 respectively.

Ignore GST and narrations are NOT required.

Required

a. Prepare the journal entries necessary to open the records of the partnership. (5 Marks)

b. Assuming in the first year that the partnership makes a profit of $127,500, prepare the journal entries to record the allocation of profit for the year ended 31 December 2020, using Method 2. (3 Marks).