Frodo, Sam, and Merry's are in a partnership together and each have capital balances of $100,000. A new partner, Pippen, pays Merry $125,000 directly for 100% of his interest in the new partnership, replacing him in the partnership. The journal entry on the books of the partnership to account for this transaction would be:

Question 22 options:

Debit Cash $125,000; Credit Capital-Pippen $125,000

No entry is made on the partnership's books as the transaction was made directly between Merry and Pippen

Debit Capital-Merry $100,000; Credit Capital-Pippen $100,000

Debit Capital-Merry $100,000, Debit Cash $25,000; Credit Capital-Pippen $125,000