Wendy, William and Wanda are independent website developers who had been trading in active opposition to one another for some years. They decide to form a partnership, WWW Web Developers, as from 1 January 2019. The agreement set out the following basic arrangements:

Wendy to contribute $8000 in cash and debtors of $12 000. Wendy also contributed computers valued at $9 000 on her record. The fair value of these computers is $1 000 higher than Wendys booking record.

William to contribute office furniture valued at $18 500 with a bank loan of $6 000, and $16 000 in cash.

Wanda to contribute computers valued at $13 750 and to act as managing partner at a salary of $20 000 per year.

Interest for the period is to be allowed partners at the rate of 8% p.a. on their original capital contributions but is not charged on drawings.

Residual profits or losses to be shared equally among three partners.

Ignore GST

Required

(1) Prepare the journal entries necessary to open the records of the partnership. (5 Marks)

(2) Assuming in the first year that the partnership makes a profit of $65 000, prepare the journal entries to record the allocation of profit for the year ended 31 December 2019. Retained Earnings accounts are not used. (3 Marks).

(Both account names and figures should be correct in order to award marks. Type your response directly into the template in the text box below. )