Following is the condensed balance sheet of Martinez, ONeill and Clemens, partners who share profits or losses in the ratio of 2:3:5.

Cash. . . . . . . . . . . . . . . . . . . . . . . . .$ 48,000 Liabilities. . . . . . . . . . . . . . . . . . . . . .$200,000

Other assets. . . . . . . . . . . . . . . . . . .752,000 CapitalMartinez. . . . . . . . . . . . . . .108,000

CapitalONeill . . . . . . . . . . . . . . . .176,000

CapitalClemens . . . . . . . . . . . . . .316,000

Total assets . . . . . . . . . . . . . . . . . . .$800,000 Total liabilities and capital . . . . . . . . $800,000

Required

a. Assume that the partnerships assets and liabilities are fairly valued as shown. The partners wish to

admit Jeter as a partner with a 40 percent interest in capital, prots, and losses. They require Jeter to

invest an amount such that bonus or goodwill adjustments are not needed. How much should Jeter

invest for the 40 percent share? $400,000

b. Assume instead that the existing partners, all of whom contemplate retirement relatively soon, de-

cide to sell Jeter 40 percent of their respective partnership interests for a total payment of $320,000.

This payment will be made proportionately to Martinez, ONeill, and Clemens. The partners agree

that implied goodwill is to be recorded prior to the transaction with Jeter. What are the capital bal-

ances of the four partners after the transaction with Jeter?

1. Martinez =$

2. O'Neill =$

3. Clemens =$

4. Jeter =$320,000