Diaz and Helms sell to Mayo a 1/3 interest in the Diaz-Helms partnership. Mayo will pay Diaz and Helms each $70,000 for admission into the organization. Before this transaction, Diaz and Helms show capital balances of $105,000 each. The journal entry to record the admission of Mayo will

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The admission of Mayo into the Diaz-Helms partnership is not a sale of the partnership's assets, but rather a sale of a portion of the partnership itself. Therefore, there is no debit to Cash. The capital accounts of Diaz and Helms will be reduced by $70,000 each, and Mayo's capital account will be credited for $140,000, representing their share in the partnership. The journal entry to record this transaction would be:

Diaz, Capital       $35,000
Helms, Capital      $35,000
To Mayo, Capital   $70,000

Diaz and Helms Sell to Mayo a 1/3 Interest in the Diaz-Helms