Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O'Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O'Donnell invests a building worth $108,000 and equipment valued at $64,000 as well as $98,000 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 10 percent of the beginning capital balance for the year. O'Donnell will also have added to his capital account 10 percent of partnership income each year (without regard for the preceding interest figure) or $8,000, whichever is larger. All remaining income is credited to Reese. Neither partner is allowed to withdraw funds from the partnership during 2016. Thereafter, each can draw $9,000 annually or 15 percent of the beginning capital balance for the year, whichever is larger. The partnership reported a net loss of $8,000 during the first year of its operation. On January 1, 2017, Terri Dunn becomes a third partner in this business by contributing $21,000 cash to the partnership. Dunn receives a 20 percent share of the business's capital. The profit and loss agreement is altered as follows: O'Donnell is still entitled 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 5:5 basis between Reese and Dunn, respectively. Partnership income for 2017 is reported as $82,000. Each partner withdraws the full amount that is allowed. On January 1, 2018, Dunn becomes ill and sells her interest in the partnership with the consent of the other two partners) to Judy Postner. Postner pays $150,000 directly to Dunn. Net Income for 2018 is $80,000 with the partners again taking their full drawing allowance. On January 1, 2019, 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 entitled 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 revaluation) 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 revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. X Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B 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. (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.) Show less No General Journal Credit Date 01/01/2016 Building Equipment Cash O'Donnell, capital Reese, capital Debit 108,000 64,000 98,000 135,000 135,000 12/31/2016 29,500 Reese, capital O'Donnell, capital Income summary 21,500 8,000 01/01/2017 Cash O'Donnell, capital Reese, capital 21,000 5,340 X 30,260 X Dunn, capital 56,600 12/31/2017 22,674 X 9,000 9,000 O'Donnell, capital Reese, capital Dunn, capital O'Donnell, drawings Reese, drawings Dunn, capital 22,674 X 9,000 9,000 5 12/31/2017 82,000 Income summary O'Donnell, capital Reese, capital Dunn, capital OOOO OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO 23,316 29,342 29,342 X 01/01/2018 76,942 X Dunn, capital Postner, capital 76,942 7 12/31/2018 22,770 X 14,337 X 11,541 X O'Donnell, capital Reese, capital Postner, capital O'Donnell, drawings Reese, drawings Postner, drawings 22,770 X 14,337 X 11,541 X 8 12/31/2018 80,000 Income summary O'Donnell, capital Reese, capital Postner, capital 23,180 28,410X 28,410 9 01/01/2019 Postner, capital O'Donnell, capital Reese, capital Cash 93,811 X 1,407 X 7,974 X 103,192 Required A Required B Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O'Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O'Donnell invests a building worth $108,000 and equipment valued at $64,000 as well as $98,000 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. 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 10 percent of the beginning capital balance for the year. O'Donnell will also have added to his capital account 10 percent of partnership income each year (without regard for the preceding interest figure) or $8,000, whichever is larger. All remaining income is credited to Reese. Neither partner is allowed to withdraw funds from the partnership during 2016. Thereafter, each can draw $9,000 annually or 15 percent of the beginning capital balance for the year, whichever is larger. The partnership reported a net loss of $8,000 during the first year of its operation. On January 1, 2017, Terri Dunn becomes a third partner in this business by contributing $21,000 cash to the partnership. Dunn receives a 20 percent share of the business's capital. The profit and loss agreement is altered as follows: O'Donnell is still entitled 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 5:5 basis between Reese and Dunn, respectively. Partnership income for 2017 is reported as $82,000. Each partner withdraws the full amount that is allowed. On January 1, 2018, Dunn becomes ill and sells her interest in the partnership (with the consent of the other two partners) to Judy Postner. Postner pays $150,000 directly to Dunn. Net Income for 2018 is $80,000 with the partners again taking their full drawing allowance. On January 1, 2019, 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 entitled 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 revaluation) 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 revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Prepare journal entries to record the previous transactions on the assumption that the goodwill (or revaluation) method is used. Drawings need not be recorded, although the balances should be included in the closing entries. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) Show lessA No General Journal Credit Date 01/01/2016 Building Equipment Cash Goodwill O'Donnell, capital Reese, capital OOOOOO Debit 108,000 64,000 98,000 270,000 270,000 270,000 | 2 12/31/2016 43,000 Reese, capital O'Donnell, capital Income summary 35,000 8,000 3 01/01/2017 Cash Goodwill Dunn, capital 21,000 72,960 X 93,960 12/31/2017 61,000 X 45,400 X 18,720 X O'Donnell, capital Reese, capital Dunn, capital O'Donnell, drawings Reese, drawings Dunn, drawings 61,000 X 45,400 18,720 X 80,000 X Income summary O'Donnell, capital Reese, capital 38,500 X 20,750 X 20,750 X Dunn, capital 6 01/01/2018 Goodwill O'Donnell, capital Reese, capital Dunn, capital ooooooooooooooooo 0000 0000 000 000 000 000 01/01/2018 150,000 Dunn, capital Postner, capital 150,000 8 12/31/2018 O'Donnell, capital Reese, capital Postner, capital O'Donnell, drawings Reese, drawings Postner, drawings 9 12/31/2018 80,000 Income summary O'Donnell, capital Reese, capital Postner, capital 01/01/2019 Goodwill O'Donnell, capital Reese, capital Postner. capital 11 01/01/2019 Postner, capital Cash (Required A Required B )