After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson and Harry Barge have balances of $64,000 and $86,000, respectively. Lewan Gorman is to be admitted to the partnership, contributing $43,000 cash to the partnership, for which he is to receive an ownership equity of $50,500. All partners share equally in income.

a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $7,200.

b. What are the capital balances of each partner after the admission of the new partner?

c. Why are tangible assets adjusted to current market prices prior to admitting a new partner?