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 31December.

Required:

a) Prepare the general journal entries necessary to record the initial investments of both partners 7 marks

b) 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 20218 marks

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 Fair Value Amount 36,000 20,000 120.500 (20,000) 95.000 85,500 Cash Accounts Receivable Building Accumulated Deprecato-Huilding Equipment (purchased 1 January 2020) Bank Loan (dae in 3 years 16,000 18.000 105.000 75.000 85.500 Craig and Michelle agreed on the following terms and distribution of Profit or Loss 1) Craig's 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 S67,000. 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: a) Prepare the general journal entries necessary to record the initial investments both partners 7 marks b) Prepare the general journal entries required to close the profit or loss summary account and distribute the profit or loss using method I at 31 December 2021 8 marks You are required to use excel functions to calculate the required values for the above requirements. Workings must be included