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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, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O'Donnell invests a building worth $130,000 and equipment valued at $140,000 as well as $60,000 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 $4,000, 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 $7.000 annually or 15 percent of the beginning capital balance for the year, whichever is larger The partnership reported a net loss of $6,000 during the first year of its operation. On January 1, 2017. Terri Dunn becomes a third partner in this business by contributing $26,000 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 6.4 basis between Reese and Dunn, respectively Partnership income for 2017 is reported as $100,000. 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 $175,000 directly to Dunn. Net income for 2018 is $99,000 with the partners again taking their full drawing allowance Activ Go to Partnership income for 2017 is reported as $100,000. 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 $175,000 directly to Dunn. Net income for 2018 is $99,000 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 for 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 In the f i nt not und Intermediate calculations - Show less No Date General Journal Credit 01/01/2016 Building Equipment Cash Goodwill O'Donnell, capital Reese, capital Debit 130,000 140,000 60,000 330,000 330,000 330,000 12/31/2016 43.000 Reese, capital O'Donnell, capital Income summary 37,000 6,000 01/01/2017 Cash Goodwill Dunn, capital 111,500 137,500 X 12/31/2017 O'Donnell, capital Reese, capital Dunn, capital O'Donnell drawings 55,050 43.050 20,625 55 050

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