Mason, Jiri, and James are partners in Woodware Company. Their capital balances as of July 31, 2014, are as follows.

Each partner has agreed to admit Frank to the partnership.

Required
1. Prepare the journal entries to record Frank€™s admission to or Mason€™s withdrawal from the partnership under each of the following conditions:
a. Frank pays Mason $25,000 for 20 percent of Mason€™s interest in the partnership.
b. Frank invests $40,000 cash in the partnership and receives an interest equal to her investment.
c. Frank invests $60,000 cash in the partnership for a 20 percent interest in the business. A bonus is to be recorded for the original partners on the basis of their capital balances.
d. Frank invests $60,000 cash in the partnership for a 40 percent interest in the business. The original partners give Frank a bonus according to the ratio of their capital balances on July 31, 2014.
e. Mason withdraws from the partnership, taking $105,000. The excess of withdrawn assets over Mason€™s partnership interest is distributed according to the balances of the Capital accounts.
f. Mason withdraws by selling her interest directly to Frank for $120,000.
2. When a new partner enters a partnership, why would the new partner pay a bonus to the old partners, or why would the old partners pay a bonus to the newpartner?

Transcribed Image Text:

Mason, Capital Dr Jiri, Capital Dr James, Capital Dr Cr. 90,000 Cr. 30,000 Cr 60,000