Joey and Rachel Are Partners Whose Capital Balances Are $400,000

question 21

Essay

Joey and Rachel are partners whose capital balances are $400,000 and $300,000 and who share profits 3:2. Due to a shortage of cash, Joey and Rachel agree to admit Ross to the firm.
Required:
Prepare the journal entries required to record Ross's admission under each of the following assumptions:
(a) Ross invests $200,000 for a 1/4 interest. The total firm capital is to be $900,000.
(b) Ross invests $300,000 for a 1/4 interest. Goodwill is to be recorded.
(c) Ross invests $150,000 for a 1/5 interest. Goodwill is to be recorded.
(d) Ross purchases a 1/4 interest in the firm, with 1/4 of the capital of each old partner transferred to the account of the new partner. Ross pays the partners cash of $250,000, which they divide between themselves.

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