Reeves and Sutherland are partners in a successful film-making company. They share profits/losses in a 2:1 ratio. A summarized balance sheet at December 31 , Year 6 , is shown below: On January 1, Year 7, Reeves and Sutherland decided to admit a new partner, Pinsent, who contributed $44,500 for a one-quarter equity and a one-quarter share of the profits. The new profit/loss ratio is such that the ratio between the old partners was retained in the new ratio. An audit performed before Pinsent was admitted showed that inventory was undervalued by $3,000, and that accounts payable was understated by $4,500. Net income for the year ending December 31 , Year 7 , was $28,000. Required: (a) Assume that the accounts have been closed for Year 6. Prepare a journal entry to correct the inventory and accounts payable. The company uses a periodic system. (b) Prepare journal entries to record two possible ways to account for the admission of Pinsent. (c) Prepare a journal entry to distribute the Year 7 profit to the three partners. (CGA adapted)