Craig Fraser and Michelle Mason set up a partnership to run a small retail business on 1 January 2021. Craig and Michelle contributed the following assets and liabilities;

• Craig to contribute $15,000 cash and other assets that have the following fair values: inventory $42,500, Motor Vehicle $110,600, and Accounts receivable totalling $35,000.
• Michelle to contribute the following net assets;

	Carrying Amount	Fair Value
Cash	16,000	16,000
Accounts Receivable	20,000	18,000
Building	120,500	105,000
Accumulated Depreciation-Building	(20,000)	-
Equipment (purchased 1 January 2020)	95,000	75,000
Bank Loan (due in 3 years)	85,500	85,500

Craig and Michelle agreed on the following terms and distribution of Profit or Loss.

1. Craigs capital was agreed to be $210,000, based on his expertise and knowledge
2. The partners have agreed on using the allowance method to manage accounts receivables
3. Annual salaries are to be allowed for Craig $38,200 and Michelle $25,400
4. Interest to be paid at 7.5% per annum on the initial capital contribution by partners.
5. Interest at 6% per annum is to be charged on partners drawings.
6. Residual profits or losses to be divided between Craig and Michelle in the proportion of 7:3 respectively.

During the first year of operation, the partnership made a profit of $67,000. Craig withdrew $6,000 on 1 September 2021; and Michelle withdrew $2,400 on 15 July 2021. The end of financial year is 31 December.

Required:

1. Prepare the general journal entries necessary to record the initial investments of both partners 7 marks

Prepare the general journal entries required to close the profit or loss summary account and distribute the profit or loss using method 1 at 31 December 2021