The partnership of Addie and Bal is adding a new partner, Cathy, and its assets and equities at book value and fair value just prior to her admission to the partnership on January 1, 2011, are as follows:

On January 2, 2011, Addie and Bal take Cathy into the partnership of Addie, Bal, and Cathy for a 40 percent interest in capital and profits.REQUIRED1. Prepare journal entries for the admission of Cathy into the partnership for an investment of $150,000 assuming that assets (including any goodwill) are revalued.2. Prepare a balance sheet for the Addie, Bal, and Cathy partnership on January 2, 2011, just after the admission of Cathy.

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Book Value Fair Value Assets $ 15,000 45,000 $ 15,000 40,000 60,000 105,000 $220,000 Cash Accounts receivable-net Inventories Plant assets-net 50,000 90,000 $200,000 Equities Accounts payable 15% note payable Addie capital (60%) Bal capital (40%) $ 30,000 50,000 $ 30,000 40,000 64,000 56,000 $200,000