Olive Oil Imports is a partnership owned by Magda Stavros and Giannis Metaxas. The partners share profit on a 3:2 basis, respectively. On January 1, 2014, they have capital balances of $95,000 and $65,000, respectively.

On that day, Magda and Giannis agree to admit Iona Xanthos to the partnership in exchange for an investment of cash into the partnership.

Instructions

(a) Prepare the journal entry to record the admission of Iona on January 1 under each of the following independent assumptions:

1. Iona invests $65,000 cash for a 33⅓% ownership interest.

2. Iona invests $95,000 cash for a 33⅓% ownership interest.

(b) For each of these alternatives, indicate the balance in each partner's capital account and total partners' equity after Iona is admitted to the partnership.

(c) Calculate the amount Iona would have to pay for a 33⅓% ownership interest where there would be no bonus to the old partners or to Iona.