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 $450,000 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.
3. Carmen invests $450,000 in the partnership for her 40% interest, and goodwill is recorded.
4. Carmen invests $600,000 in the partnership for her 40% interest, and goodwill is recorded.