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Sharon and Rebecca agreed to combine their businesses and formed a partnership on 1 July 2017. The fair value and the carrying amount of the

Sharon and Rebecca agreed to combine their businesses and formed a partnership on 1 July 2017. The fair value and the carrying amount of the assets contributed by each partner, and the liabilities assumed by the partnership are shown below:

The partners were entitled to 5 per cent interest on the initial capital. Rebecca ran the partnership and received a salary of $70,000. The profit for the year ended 30 June 2018 was $200,000 before providing for interest and salary. Sharon and Rebecca agreed to share the residual on a 60:40 basis respectively. Assume that they use the fixed capital accounts method (Method 2).

Required: Prepare the required journal entries to record all the transactions related to establishing the partnership and allocating the profit. Narrations are not required. Show supporting calculations

sharon Rebrcca

Carrying amount Fair value Carrying amount Fair value
Cash at bank 16200 16200 15800 15800
Accounts receivable 22800 22800 21400 21400
inventory 52000 78000 125000 72000
Equipment 112000 75000 125000 72000
Accumulated depreciation (48600) - (46500) -
Accounts payable 13400 13400 12800 12800

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