Advanced Accounting

William and Frank are partners whose capital balances are $400,000 and $300,000 and who share profits 3:2. Due to a shortage of cash, William and Frank agree to admit Sammy to the firm.

Required:  Prepare the journal entries required to record Sammy’s admission under each of the following assumptions:

• Sammy invests $200,000 for a 1/4 interest. The total firm capital is to be $900,000.
• Sammy invests $300,000 for a 1/4 interest. Goodwill is to be recorded.
• Sammy purchases a 1/4 interest in the firm, with 1/4 of the capital of each old partner transferred to the account of the new partner. Sammy pays the partners cash of $250,000, which they divide between themselves.
• The principal types of partnerships are general partnerships, limited partnerships, and joint ventures. Describe the characteristics of each type of partnership.
• There are two methods of recording changes in the membership of a partnership – the bonus method and the goodwill method. Describe these two methods of recording changes in partnership membership.

In 2-4 pages, complete the following:

1. Prepare the journal entries for the investment of 1/4 interest. No goodwill is recorded
2. Prepare the journal entries for the investment of 1/4 interest. Goodwill is to be recorded.
3. Prepare the journal entries for the purchase a 1/4 interest in the firm, with 1/4 of the capital of each old partner transferred to the account of the new partner.
4. Explain the types of partnerships are general partnerships, limited partnerships, and joint ventures.
5. Explain the two methods of recording changes in the membership of a partnership
6. While the lack of formality may be viewed as an advantage of a partnership over a corporation, it is still necessary to plan for various factors affecting the partnership. Therefore, it is advisable for the partners to develop a written partnership agreement or articles of partnership. 
   1. List seven provisions that should be included in the articles of partnership besides the partnership name and address, the names of the partners and the effective date of the partnership.
   2. Discuss why the articles of partnership are important.