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Prepare the journal entries to record admission of Harrison

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Question - King and Gomez are in an automobile repair business. Their respective capital balances are $170,000 and $110,000, and they share profits and losses in a 3:2 ratio. Because of the growth in their auto repair business, they decide to admit a new partner. Harrison is admitted to the partnership, after which King, Gomez and Harrison agree to share 3:2:1.

Required - Prepare the necessary journal entries to record the admission of Harrison in each of the following independent situations.

1. Harrison invests $120,000 for a 1/4 capital interest. Goodwill is recognized.

2. Harrison invests $60,000 for a 1/5 capital interest. Total capital after the admission of Harrison is to be $340,000. Use the bonus method.

3. Harrison purchases a 20% capital interest directly from each partner. King and Gomez receive $60,000 directly from Harrison.

Reference no: EM132535780

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