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Good, Hood, and Food are partners, sharing profits equally. They decide to admit Mood for an equal partnership (25%). The balances of the partners’ capital accounts are:
Required: Prepare journal entries to record admission of Mood, using the bonus method:
- assuming the bonus is paid to the new partner; Mood invests $15,000 cash;
- assuming the bonus is paid to existing partners; Mood invests $45,000 cash; the remaining partners benefit equally from the bonus.
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