Question 4 15 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: . . Fair Value Carrying Amount 16,000 20,000 120,500 (20,000) 95,000 85,500 Cash Accounts Receivable Building Accumulated Depreciation-Building Equipment (purchased 1 January 2020) Bank Loan (due 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 $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 31 December 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 2021 8 marks