Cathy, Tim and Lucas started a partnership online retailing business as from 1 January 2022. The agreement set out the following basic arrangements:

Cathy to contribute $12 000 in account receivables and inventory valued at $8 000. She also contributed computers valued at $10 000 on her record. The fair value of these computers was $2 000 lower than Cathys booking record on 1 January 2022.

Tim to contribute $26 000 in cash and office furniture, which originally cost $35 500. Based on Tims accounting record, the accumulated depreciation of office furniture showed $15 000. The bank loan associated with office furniture is $10 000.

Lucas to contribute inventory valued at $24 750 and to act as managing partner at a salary of $20 000 per year.

Interest to be allowed at 5% p. a. on the capital contribution by the partners. Residual profits or losses to be shared equally among three partners.

Ignore GST

Required

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

2) Assuming that the partnership makes a profit of $95 000 for the year ended 30 June 2022, prepare the journal entries to record the allocation of profit. Retained Earnings accounts are not used. (3 Marks).