After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $76,000 and $122,000, respectively. Lewan Gorman is to be admitted to the partnership, contributing $51,000 cash to the partnership, for which he is to receive an ownership equity of $66,000. All partners share equally in income. a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $15,000. If an amount box does not require an entry, leave it blank. b. What are the capital balances of each partner after the admission of the new partner? Partner Balance Grayson 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, v 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.
After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $76,000 and $122,000, respectively. Lewan Gorman is to be admitted to the partnership, contributing $51,000 cash to the partnership, for which he is to receive an ownership equity of $66,000. All partners share equally in income. a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $15,000. If an amount box does not require an entry, leave it blank. b. What are the capital balances of each partner after the admission of the new partner? Partner Balance Grayson 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, v 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.
Chapter21: Partnerships
Section: Chapter Questions
Problem 57P
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
Transcribed Image Text:After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $76,000 and $122,000, respectively. Lewan Gorman is to be
admitted to the partnership, contributing $51,000 cash to the partnership, for which he is to receive an ownership equity of $66,000. All partners share equally in income.
a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $15,000. If an amount box does not require an entry, leave it blank.
b. What are the capital balances of each partner after the admission of the new partner?
Partner
Balance
Grayson 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,
v 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.
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