Davis and North, partners in an advertising business, share profits and losses in the
ratio of 7:4, respectively. Prior to recording the admission of Martin as a new
partner, Davis has a capital balance of $80,000, and North has a capital balance of
$100,000.
Required: For each of the following independent cases, prepare the journal entry
that was made to record the admission of Martin into the partnership.
1.
Davis invested $50,000 cash in the partnership for a 20% interest. The
goodwill/revaluation method is used and the fair value of the land is $5,000
more than the book value on this date.
2.
Martin invested $40,000 cash in the partnership for a 10% ownership interest.
The bonus method is used.
3.
Martin purchased 25% of the respective capital balances of Davis and North,
paying $40,000 cash directly to each of them.
