Mark, Sara and Tom are independent website developers who had been trading in active opposition to one another for some years. They decide to form a partnership, WWW Web Developers, as from 1 January 2019. The agreement set out the following basic arrangements:

Mark to contribute $18 000 in cash, and to act as managing partner at a salary of $15 000 per year.

Sara to contribute office furniture valued at $18 500 with a bank loan of $8 000, computers of $10 000 and $18 000 in cash.

Tom to contribute computers valued at $13 750 on Toms accounting record, and debtors of $12 000. The fair value of these computers is $2 000 less than Toms record.

Interest for the period is to be allowed partners at the rate of 7% p.a. on their original capital contributions. Sara withdrew $4 000 on 1 April 2019, and interest at 10% p.a. to be charged on her drawings.

Residual profits or losses to be shared among Mark, Sara and Tom in the proportion of 1:2:2 respectively.

Ignore GST

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 $105 000, prepare the journal entries to record the allocation of profit for the year ended 31 December 2019, using Method 1. (3 Marks)

(Both account names and figures should be correct in order to award marks. Type your response directly into the template in the text box below. )