E 16-8 Recording new partner investment—Revaluation caseBow and Mon are partners in a retail business and divide profits 60 percent to Bow and 40 percent to Mon. Their capital balances at December 31, 2016, are as follows:Bow capital$120,000Mon capital 120,000 Total capital$240,000Partnership assets and liabilities have book values equal to fair values. The partners agree to admit Joh into the partnership. Joh purchases a one-third interest in partnership capital and profits directly from Bow and Mon (one-third of each of their capital accounts) for $100,000.RequiredPrepare journal entries for the admission of Joh into the partnership, assuming that partnership assets are revalued.

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Asked Sep 2, 2019
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E 16-8 Recording new partner investment—Revaluation case

Bow and Mon are partners in a retail business and divide profits 60 percent to Bow and 40 percent to Mon. Their capital balances at December 31, 2016, are as follows:

Bow capital

$120,000

Mon capital

 120,000

 Total capital

$240,000

Partnership assets and liabilities have book values equal to fair values. The partners agree to admit Joh into the partnership. Joh purchases a one-third interest in partnership capital and profits directly from Bow and Mon (one-third of each of their capital accounts) for $100,000.

Required

Prepare journal entries for the admission of Joh into the partnership, assuming that partnership assets are revalued.

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Expert Answer

Step 1

Step 1:

Calculate the goodwill brought by ...

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1 Interest on partnership capital 3 Goodwill brought = Joh capital Total capital x S100, 000 S240,000 x S100, 000-80,000 S20,000

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