On 1 January 2022, James and Peter formed a partnership business. As part of the partners capital contribution James contributed $200,000 in cash and Peter contributed land and building valued at $300,000.

The profit of $300,000 for the year ended 31 December 2022 is to be allocated assuming a $45,000 salary to James and a $55,000 salary to Peter. The partners will also receive an interest allowance of 15% on their capital investments. Any remaining profit is to be shared equally.

Required:

Prepare the general journal entries to record the following: (Explanations are not required)

(a) initial capital investments (2 marks)

(b) allocation of profit to the partners (3 marks)