Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob

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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, 2019, O’Donnell invests a building worth
$106,000 and equipment valued at $48,000 as well as $46,000 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:
The partnership reported a net loss of $9,000 during the first
year of its operation. On January 1, 2020, Terri Dunn becomes a
third partner in this business by contributing $30,000 cash to the
partnership. Dunn receives a 20 percent share of the business’s
capital. The profit and loss agreement is altered as follows:
Partnership income for 2020 is reported as $76,000. Each partner
withdraws the full amount that is allowed.
On January 1, 2021, Dunn becomes ill and sells her interest in
the partnership (with the consent of the other two partners) to
Judy Postner. Postner pays $95,000 directly to Dunn. Net income for
2021 is $73,000 with the partners again taking their full drawing
allowance.
On January 1, 2022, 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.
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.
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.