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; Cash Accounts Receivable Carrying Amount 16,000 20,000 120,500 (20,000) 95,000 Fair Value 16,000 18,000 105,000 Building Accumulated Depreciation-Building Equipment (purchased 1 January 2020) Bank Loan (due in 3 years) 75,000 85,500 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 73 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. 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