The inexperienced accountant for Fox, Gee & Hay LLP prepared the following journal entries during the fiscal year ended August 31, 2005:

Prepare journal entries for Fox, Gee & Hay LLP on August 31, 2005, to correct the accounting records, which have not been closed for the year ended August 31, 2005. Assume that Hay’s admission to the partnership should have been recorded by the bonus method.
Do not reverse the foregoing journal entries.

Prepare journal entries for Fox, Gee & Hay LLP on August 31, 2005, to correct the accounting records, which have not been closed for the year ended August 31, 2005. Assume that Hay’s admission to the partnership should have been recorded by the bonus method.
Do not reverse the foregoing journal entries.

King decided to retire from the partnership on June 30, 2005, and by mutual agreement of the partners the plant assets were adjusted to their total current fair value of $260,000. The partnership paid $92,000 cash for King’s equity in the partnership, exclusive of the loan, which was repaid in full. No goodwill was to be recognized in this transaction.
Prepare journal entries for King, Lowe & More LLP on June 30, 2005, to record the adjustment of plant assets to current fair value and King’s retirement.

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2004 Sept. 1 Cash Goodwill Fox, Capital ($150,000 x 0.25) Gee, Capital ($150,000 x 0.75) Hay, Capital To record admission of Hay for a 20% interest in net assets, with goodwill credited to Fox and Gee in their former income-sharing ratio. Goodwill is computed as follows: Implied total capital, based on Hay's investment ($50,0005) $250,000 Less: Net assets prior to Hay's admission 100,000 Goodwill $150,000 2005 Aug. 31 Income Summary Fox, Capital ($30,000 x 0.20) Gee, Capital ($30,000 x 0.60) Hay, Capital ($30,000 x 0.20) To divide net income for the year in the residual income- sharing ratio of Fox, 20% ; Gee, 60%; Hay, 20%. Provision in partnership contract requiring $40,000 annual salary allowance to Hay is disregarded because income before salary is only $30,000. 50,000 150,000 37,500 112,500 50,000 30,000 6,000 18,000 6,000