Problem 3

The capital accounts of the Low, Medium and High partnership at December 31, 2019, together with profit and loss sharing ratios are as follows:

Low (40%) 204,000

Medium (20%) 118,000

High (40%) 278,000

The partners agree to admit Very High into the partnership.

REQUIRED: Prepare the journal entry or entries to admit Very High into the partnership under each of the following independent assumptions.

1. Low sells half of his interest and medium sells 40% of her interest to Very High for a total purchase price of $190,000 paid directly to Low and Medium.

2. Very High invests $180,000 cash in the partnership for a 20% interest in capital and profits and the partnership assets are not revalued.

3. Very High invests $120,000 cash in the partnership for a 20% interest in capital and profits and the partnership assets are revalued.

4. Very High invests $200,000 cash in the partnership for a 30% interest in the capital and profits and partnership assets are revalued.