The capital balances and profits and loss sharing percentages for the Sprint, Jog, and Run partnership at December 31, 2011, are as follows:
Sprint capital (30%) ... $160,000
Jog capital (50%) .... $180,000
Run capital (20%) ... $140,000
The partners agree to admit Walk into the partnership on January 1, 2012, for a 20 percent interest in the capital and income of the business.
REQUIRED
1. Prepare the journal entry or entries to record Walk’s admission to the partnership assuming that he invests $100,000 in the partnership for the 20% interest and that partnership capital is revalued. Assume that the book value of partnership assets equals the fair value.
2. Prepare the journal entry or entries to record Walk’s admission to the partnership assuming that he invests $140,000 in the partnership for the 20% interest and that partnership capital is revalued.