Recording new partner investmentVarious situations

The AT Partnership was organized several years ago, and on January 1, 2011, the partners agree to admit Carmen for a 40 percent interest in capital and earnings. Capital account balances and profit and loss sharing ratios at January 1, 2011, before the admission of Carmen, are as follows:

Aida (50%)

$500,000

Thais (50%)

280,000

REQUIRED: Prepare journal entries to record the admission of Carmen for a 40 percent interest in the capital and rights to future profits under the following independent assumptions.

1. Carmen pays $600,000 directly to Aida and Thais for 40% of each of their interests, and the bonus procedure is used.

2. Carmen pays $600,000 directly to Aida and Thais for 40% of each of their interests, and goodwill is recorded.