Project Part B (PR-B): Accounting for Partnerships For Part B of the Project your teacher will provide you with an Excel spreadsheet template file to complete the required tasks; see file name below: FNSACC414 Assessment 4 Part B templates Background Information: Read through the following background information and then follow the instructions provided in each of Project Tasks 1 and 2. Ray and Charles operate music stores in Melbourne, Victoria and have agreed to form a partnership commencing on 1st January 2020. On this date their respective financial positions as sole traders were as follows: Ray's Music Charles's Music Balance Sheet Balance Sheet As at 31 December 2019 As at 31 December 2019 Assets $ Assets $ Cash at bank 20.000 Equipment 70.000 Accounts Receivable 23.000|| Accounts Receivable 30.000 Stock on hand 24,000 Less Allowance for Doubtful (7.000 Debts Equipment 55,000|| Stock on hand 27.000 122.000 Liabilities 120.000 Accounts Payable 24,000 Liabilities Net Assets 98.000 Accounts Payable 28.000 Owner's Equity Net Assets 92,000 Capital - Ray 98.000 Owner's Equity Capital - Charles 92.000 The Partnership Agreement made by Ray and Charles included the following clauses: The Partnership business name is to be Ray Charles Music. Each partner is to contribute net assets to the partnership valued at $100,000 per partner. Each partner is entitled to a monthly salary of $5,000. Interest on loans (advances) from partners shall be at the rate specified in the Victorian Partnership Act. Interest on Capitals shall be at the rate of 8% per annum. Remaining Profit or Losses shall be divided amongst partners in in proportion to their Capital account balances at 30 June Extract of Accounting Policies and Procedures of Ray Charles Music: The business is registered for GST Reporting Requirements: The business must prepare an income Statement, Balance Sheet and Statement of Cash Flows. The financial reports should comply with AASB 101: Presentation of Financial Statements and AASB 107: Cash Flow Statements General Journal Entries . General Journal tasks should be appropriately structured in accordance with standard accounting practice and should contain: . The correct date of the entry The correct name of the general ledger account brief memo that describes the transaction . General Ledger A Chart of Accounts has been drawn up in consultation with the accountant of the business Ledger accounts shall not be added, changed, or deleted without consultation with your supervisor All general ledger accounts need to be appropriately completed, showing a running balance in each line entry (3 column ledger accounts) Stocktake The business uses the Perpetual Inventory system to manage its inventory, with an annual stocktake being completed at the end of the year in late June or early July to reflect stock levels accurately. Journal adjustments are required to reconcile the stock on hand in the General Ledger Authorisation procedures Any discrepancies, verification or authorisations must be referred to the senior accountant for investigation and correction NOTE: the textbook usually only requires selected General Ledger accounts to be prepared for this topic, but as this is a Project, the entire General Ledger is required and should record all transactions to the end of Task 2. PR-B Task 1 - Formation of a Partnership Partnership Agreement on Formation of the Partnership: 1. Ray and Charles have agreed to bring ALL the net assets of their existing sole trader businesses into the partnership business at the following values. Agreed values of each partner's respective net assets $ $ Ray's Music Assets Cash at bank Accounts Receivable Allowance for Doubtful Debts Stock on hand Equipment Liabilities Accounts Payable Charles's Music Assets 20,000 Accounts Receivable Allowance for Doubtful 23,000 Debts (3.000)|| Stock on hand 22.000 Equipment 52,000 Liabilities 24.000 Accounts Payable 30,000 (5,000 20,000 68,000 13.000 2. The partners agreed that (a) Their capital contributions in the partnership must $100,000 each and (b) If the value of their respective net assets brought in from their sole trader entities does not equal this amount then adjustments must be made to identify either goodwill or a loan to the partnership (by the partner) when introducing their net assets to the partnership accounts. Your Instructions: Using this information you are required to: PR-31.1: Prepare the General journal entries to form the partnership at 1 PR-31.2 Post journal entries to the General Ledger and Prepare a Trial Balance at 1 January Note: The general ledger accounts you create in Task 1 will then be used in Task 2 of January 2020 PR-B1.3: this assessment. PR-B Task 2 - Operating a Partnership and Appropriation of Profits The following is a summary of cash transactions which occurred during the period 1 January 2020 to 30 June 2020. On 1st April the Ray contributed another $10,000 cash as capital to the partnership. On 1st May Charles loaned the partnership $12,000 cash repayable in 5 years. Cash Purchases of Stock for the period to 30 June $110,000 (GST inclusive) Cash Marketing expenses for the period to 30 June $ 11,000 (GST inclusive) Cash Administrative expenses for the period to 30 June $ 22,000 (GST inclusive) Cash Sales for the period to 30 June $275,000 (GST inclusive) Cost price of cash sales $125,000 Payments made to partners for period to 30 June: Salaries paid in cash Ray $24,000 Charles $26,000 Drawings taken in cash: $15,000 Charles $20,000 Ray Your Instructions: PR-B2.1: Record the above transactions for the period ended 30 June 2020 in the General Journal and post to the General Ledger. PR-B2.2: Identify & record the following adjustments in the General Journal and post to the General Ledger (a) A stocktake at 30 June valued Stock on hand at $15,000. (b) Equipment to be depreciated using the straight line method at 10.00% per annum. (c) Salaries to be adjusted to ensure compliance with the Partnership Agreement. (d) Interest on partner's loans as per the Partnership Agreement. PR-B2.3: Close the accounts at 30 June 2020 and transfer Net profit or loss to the Profit and Loss Appropriation account PR-B2.4: Record General Journal entries to account for entitlements and charges, the distribution of profit or loss and the finalisation of the accounts for the period ended 30th June 2020 in accordance with the Partnership Agreement and general accounting principles and practices, post to the General Ledger and prepare a Trial Balance at 30 June. PR-B2.5: Review, verify and have all transactions and Trial Balance authorised by your assessor before preparing the end of year financial reports PR-B2.6: Prepare the following financial reports: (a) An Income Statement for the period ended 30 June 2020. (b) A Balance Sheet at 30 June 2020. (C) A Statement of Cashflows for the period ended 30 June 2020