After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $44,920 and $60,890, respectively. Lewan Gorman is to be admitted to the partnership, contributing $32,080 cash to the partnership, for which he is to receive an ownership equity of $36,650. All partners share equally in income.Required:a.On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.b.What are the capital balances of each partner after the admission of the new partner?c.Why are tangible assets adjusted to current market prices, prior to admitting a new partner? Chart of Accounts CHART OF ACCOUNTSJackson, Barge, and GormanGeneral Ledger ASSETS110Cash111Petty Cash112Accounts Receivable113Allowance for Doubtful Accounts114Interest Receivable115Notes Receivable116Inventory117Office Supplies118Store Supplies119Prepaid Insurance120Land123Equipment124Accumulated Depreciation-Equipment129Asset Revaluations133Patent LIABILITIES210Accounts Payable211Salaries Payable213Sales Tax Payable214Interest Payable215Notes Payable EQUITY310Grayson Jackson, Capital311Grayson Jackson, Drawing312Harry Barge, Capital313Harry Barge, Drawing314Lewan Gorman, Capital315Lewan Gorman, Drawing REVENUE410Sales610Interest Revenue EXPENSES510Cost of Merchandise Sold520Salaries Expense521Advertising Expense522Depreciation Expense-Equipment523Delivery Expense524Repairs Expense529Selling Expenses531Rent Expense533Insurance Expense534Office Supplies Expense535Store Supplies Expense536Credit Card Expense537Cash Short and Over538Bad Debt Expense539Miscellaneous Expense710Interest Expense Journal a. On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.PAGE 10 JOURNALACCOUNTING EQUATION DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY1 2 3 4 Final Questions b. What are the capital balances of each partner after the admission of the new partner?PartnerBalanceGrayson Jackson Harry Barge Lewan Gorman c. Why are tangible assets adjusted to current market prices, prior to admitting a new partner?Tangible assets should be adjusted to current market prices so that the new partner any gains or losses from changes in market prices prior to being admitted. For example, if the market price of land doubled prior to admitting new partners, should realize the increase in the value of the land in their capital accounts prior to the new partners’ admission. Otherwise, would share in the increase in the market value of the land.

Question

After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $44,920 and $60,890, respectively. Lewan Gorman is to be admitted to the partnership, contributing $32,080 cash to the partnership, for which he is to receive an ownership equity of $36,650. All partners share equally in income.Required:a.On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.b.What are the capital balances of each partner after the admission of the new partner?c.Why are tangible assets adjusted to current market prices, prior to admitting a new partner?  Chart of Accounts  CHART OF ACCOUNTSJackson, Barge, and GormanGeneral Ledger ASSETS110Cash111Petty Cash112Accounts Receivable113Allowance for Doubtful Accounts114Interest Receivable115Notes Receivable116Inventory117Office Supplies118Store Supplies119Prepaid Insurance120Land123Equipment124Accumulated Depreciation-Equipment129Asset Revaluations133Patent LIABILITIES210Accounts Payable211Salaries Payable213Sales Tax Payable214Interest Payable215Notes Payable EQUITY310Grayson Jackson, Capital311Grayson Jackson, Drawing312Harry Barge, Capital313Harry Barge, Drawing314Lewan Gorman, Capital315Lewan Gorman, Drawing REVENUE410Sales610Interest Revenue EXPENSES510Cost of Merchandise Sold520Salaries Expense521Advertising Expense522Depreciation Expense-Equipment523Delivery Expense524Repairs Expense529Selling Expenses531Rent Expense533Insurance Expense534Office Supplies Expense535Store Supplies Expense536Credit Card Expense537Cash Short and Over538Bad Debt Expense539Miscellaneous Expense710Interest Expense  Journal  a. On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.PAGE 10 JOURNALACCOUNTING EQUATION  DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY1        2        3        4            Final Questions  b. What are the capital balances of each partner after the admission of the new partner?PartnerBalanceGrayson Jackson Harry Barge Lewan Gorman  c. Why are tangible assets adjusted to current market prices, prior to admitting a new partner?Tangible assets should be adjusted to current market prices so that the new partner    any gains or losses from changes in market prices prior to being admitted. For example, if the market price of land doubled prior to admitting new partners,     should realize the increase in the value of the land in their capital accounts prior to the new partners’ admission. Otherwise,     would share in the increase in the market value of the land.

Accepted Answer

Part a)

Journal Entry

Particualrs 
Amt (Dr) ($)
Amt (Cr) ($)

Cash     Dr
32080

Grayson…

a.	On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
b.	What are the capital balances of each partner after the admission of the new partner?
c.	Why are tangible assets adjusted to current market prices, prior to admitting a new partner?

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4