On 1 September 2018, Graham and Pawan formed a partnership, and agreed to have the financial year end to be 31 December. Graham contributed a Building and Land. The building had a carrying amount of $100,000 and fair value of $150 000, and the land had a $120,000 carrying amount and $200,000 fair value. The building and land had a mortgage of $90 000, both partners agreed for the mortgage to be taken over by the partnership Pawan contributed his business in which both partners agreed to use the following values as listed below. Carrying amount Fair value Cash at bank $ 20 000 20 000 Marketable securities 24 000 32 800 Accounts receivable 45 000 42 000 Inventory 75 600 75 000 Equipment 200 000 100 200 Accumulated depreciation 120 000 0 Accounts payable 16 000 16 000 They agreed to share profits and losses in the ratio of 1:2 for Pawan and Graham, and to have equal capital balances of $300 000. Regarding the accounting record, they agreed to use the allowance method in managing estimated uncollectible accounts receivable. On 1 January 2019, Joshua joined the partnership and requested to alter the existing profit and loss distribution agreement. They agreed that each partner is allowed an interest of 5% on ending capital balances before drawings, and 10% interest per annum is charged on any drawings they made. Since all partners are active in looking after the business, each partner is given a salary allowance. Pawan is given $7 500, Graham $ 4 500, Joshua 4 000 and the remainder of the profit or loss is shared equally. At 31 December 2019, the accounting records showed the net income for 2019 was $46 000, and the balance of capital and drawing of each partner is as shown below. It should be noted that the all drawings were made in expectation of profits. Capital Drawing Withdrew on Pawan $350,000 $40,000 (1 January 2019) Graham $320,000 $15,000 (1 March 2019) Joshua $300,000 $30,000 (1 August 2019) Required (ignore GST and narrations): a) Prepare the journal entries to record the formation of the partnership on 1 September 2018. (7 marks) (6 marks) b) Prepare a profit distribution table to show the net profit distributed to the three partners at 31 December 2019. On 1 September 2018, Graham and Pawan formed a partnership, and agreed to have the financial year end to be 31 December. Graham contributed a Building and Land. The building had a carrying amount of $100,000 and fair value of $150 000, and the land had a $120,000 carrying amount and $200,000 fair value. The building and land had a mortgage of $90 000, both partners agreed for the mortgage to be taken over by the partnership Pawan contributed his business in which both partners agreed to use the following values as listed below. Carrying amount Fair value Cash at bank $ 20 000 20 000 Marketable securities 24 000 32 800 Accounts receivable 45 000 42 000 Inventory 75 600 75 000 Equipment 200 000 100 200 Accumulated depreciation 120 000 0 Accounts payable 16 000 16 000 They agreed to share profits and losses in the ratio of 1:2 for Pawan and Graham, and to have equal capital balances of $300 000. Regarding the accounting record, they agreed to use the allowance method in managing estimated uncollectible accounts receivable. On 1 January 2019, Joshua joined the partnership and requested to alter the existing profit and loss distribution agreement. They agreed that each partner is allowed an interest of 5% on ending capital balances before drawings, and 10% interest per annum is charged on any drawings they made. Since all partners are active in looking after the business, each partner is given a salary allowance. Pawan is given $7 500, Graham $ 4 500, Joshua 4 000 and the remainder of the profit or loss is shared equally. At 31 December 2019, the accounting records showed the net income for 2019 was $46 000, and the balance of capital and drawing of each partner is as shown below. It should be noted that the all drawings were made in expectation of profits. Capital Drawing Withdrew on Pawan $350,000 $40,000 (1 January 2019) Graham $320,000 $15,000 (1 March 2019) Joshua $300,000 $30,000 (1 August 2019) Required (ignore GST and narrations): a) Prepare the journal entries to record the formation of the partnership on 1 September 2018. (7 marks) (6 marks) b) Prepare a profit distribution table to show the net profit distributed to the three partners at 31 December 2019