Peter, Mara, and Vanessa are partners in the Image Gallery. As of November 30, 2011, the balance in Peter's Capital account was $50,000, the balance in Mara's was $60,000, and the balance in Vanessa's was $900,000. Peter, Mara, and Vanessa share income and losses in a ratio of 2:3:5.
Required
1. Prepare entries in journal form for each of the following independent conditions:
a. Bob pays Vanessa $100,000 for four-fifths of Vanessa's interest.
b. Bob is to be admitted to the partnership with a one-third interest for a $100,000 cash investment.
c. Bob is to be admitted to the partnership with a one-third interest for a $160,000 cash investment. A bonus, based on the partners' ratio for income and losses, is to be distributed to the original partners when Bob is admitted.
d. Bob is to be admitted to the partnership with a one-third for an $82,000 cash investment. A bonus is to be given to Bob on admission.
e. Peter withdraws from the partnership, taking $66,000 in cash.
f. Peter withdraws from the partnership by selling his interest directly to Bob for $70,000.
2. In general, when a new partner enters a partnership, why would the new partner pay a bonus to the old partners, or why the old partners pay a bonus to the new partner?