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Steve Reese is a well - known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O Donnell

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Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob ODonnell, a local merchant, to contribute the capital to form a partnership. On January 1,2022, ODonnell invests a building worth $52,000 and equipment valued at $16,000 as well as $12,000 in cash. Although Reese makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances. To entice O'Donnell to join this partnership, Reese draws up the following profit and loss agreement: O'Donnell will be credited annually with interest equal to 20 percent of the bginning capital balance for the year. O'Donnell will also have added to his capital account 15 percent of partnership income each year (without regard for the preceding interest figure) or $4000, whichever is larger. All remaining income is credited to Reese. Neither partner is allowed to withdraw funds from the partnership during 2022. Thereafter, each can draw $5000 annually or 20 percent of the beginning capital balance for the year, whichever is larger.
The partnership reported a net loss of $10,000 during the first year of its operation. On Januuary 1,2023, Terri Dunn becomes a third partner in this business by contributing $15,000 cash to the partnership. Dunn received a 20 percent share of the business's capital. The profit and loss agreement is altered as follows: O'Donnell is still entitiled to (1) interest on his beginning capital balance as well as (2) the share of partnership income just specified. Any remaining profit or loss will be split on a 6:4 basis between Reese and Dunn, respectively. Partnership income for 2023 is reported as $44,000. Each partner withdraws the full amount that is allowed.
On January 1,2024, Dunn becomes ill and sells her interest in the partnership (with the consent of the other two partners) to Judy Postner. Postner pays $46,000 directly to Dunn. Net income for 2024 is $61,000 with the partners again taking their full drawing allowance.
On Jnauary 1,2025, Postner withdraws from the business for personal reasons. THe articles of partnership state that any partner may leave the partnership at any time and is entitles to receive cash in an amount equal to the recorded capital balance at that time plus 10 percent.
A. Prepare Journal Entries to record the preceding transactions on the assumption that the bonus (or no reevaluation) method is used. Drawings need not be recorded , although the balances should be included in the closing entries.
B. Prepare Journal Entries to record the previous transactions on the assumption that the goodwill (or reevaluation) method is used. Drawings need not be recorded , although the balances should be included in the closing entries.
1.Record the initial investment of assets by partners.
2. Record the distribution of net income to partners.
3. Record the admittance of Dunn into the partnership.
4. Record entry to close drawing accounts
5. Record the distribution of net income to the partners.
6. Record the admittance of Postner into the partnership.
7. Record entry to close drawing accounts.
8. Record the distibution of net income to partners.
9. Record the cash paid to the withdrawing partner
Beginning capital is confirmed at 40000 for Odonnell and Reece. Journal Entry images are attached. Prepare journal entries to record the preceding transactions on the assumption that the bonus (or no revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest dollar amount.
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\table[[No,Date,General Journal,Debit,Credit],[1,01/01/2022,Cash,,12,000,],[,Building,0,52,000,],[,Equipment,0,16,000,],[,O'Donnell, capital,0,,40,000],[,Reese, capital,0,,40,000],[2,12/31/2022,Reese, capital,0,,],[,O'Donnell, capital,0,,],[,Income summary,,,10,000]]\table[[3,01/01/2023,Cash,0,15,000,],[,O'Donnell, capital,,,],[,Reese, capital,0,,],[,Dunn, capital,0,,17,000],[4,12/31/2023,O'Donnell, capital,0,,],[,Reese, capital,0,,],[,Dunn, capital,0,,],[,O'Donnell, drawings,0,,],[,Reese, drawings,0,,],[,Dunn, drawings,0,,],[5,12/31/2023,Income summary,0,44,000,],[,O'Donnell, capital,0,,],[,Reese, capital,0,,],[,Dunn, capital,0,,]]
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