Reese and Janet

(TCO G) Reese and Janet share partnership profits and losses at 70% and 30%, respectively. The partners agree to admit Smith into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Smith are:

Reese (70%) $400,000

Janet (30%) $300,000

Total $700,000

REQUIRED:

Prepare the journal entry(s) and defend your reasoning process for the admission of Smith to the partnership assuming Smith invested $400,000 for the ownership interest. Smith paid the money directly to Reese and to Janet for 50% of each of their respective capital interests. The partnership records goodwill.

Prepare the journal entry(s) and defend your reasoning process for the admission of Smith to the partnership assuming Smith invested $300,000 for the ownership interest. Smith paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill.

Prepare the journal entry(s) and defend your reasoning process for the admission of Smith to the partnership assuming Smith invested $800,000 for the ownership interest. Smith paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill.