On December 31, 2014, Jim Austin and Mike Mundy agree to combine their proprietorships as a partnership. Their balance sheets on December 31 are as follows:

Required
1. Prepare the partnership balance sheet on December 31, 2014.
2. Assume John Allen wants to join the partnership by paying $212,000 for a ¼ interest. The partnership equity before John joins is $960,000, and Jim Austin and Mike Mundy shared profits 60 percent for Austin and 40 percent for Mundy. Prepare the journal entry to record John's admission to the partnership on January 1, 2015.
3. What percent of the profits will John Allen receive after becoming a partner?

Transcribed Image Text:

Austin's Business Mundy's Business Book Book Value Market Value Value Market Value Current Current Assets Cash Accounts receivable (net) Inventory Capital assets (net) Total assets $ 30,000 S 30,000 110,000 100,000 255,000 230,000 25,000 $25,000 35,000 170,000 180,000 40,000 25,000 270,000 300 S1,005,000 $885,000 $505,000 $540,000