L. Bowers and V. Lipscomb are partners in Elegant Event Consultants. Bowers and Lipscomb share income equally. M. Ortiz will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each partner are $96,000 and $40,000, respectively, prior to the revaluation.a. Provide the journal entry for the asset revaluation.b. Provide the journal entry for Ortiz’s admission under the following independent situations:1. Ortiz purchased a 20% interest for $20,000.2. Ortiz purchased a 30% interest for $60,000.

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Asked Dec 19, 2019
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L. Bowers and V. Lipscomb are partners in Elegant Event Consultants. Bowers and Lipscomb share income equally. M. Ortiz will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each partner are $96,000 and $40,000, respectively, prior to the revaluation.
a. Provide the journal entry for the asset revaluation.
b. Provide the journal entry for Ortiz’s admission under the following independent situations:
1. Ortiz purchased a 20% interest for $20,000.
2. Ortiz purchased a 30% interest for $60,000.

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Expert Answer

Step 1

Partnership 

It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio.

Forming a Partnership 

While forming the partnership, the contribution of assets by partners are debited to the partnership assets account; whereas the liabilities of the partnerships are credited to the partnership’s liabilities account, and the net amount of the investments of partners are credited to the partners’ individual capital account.

Step 2

a.

Record the journal entry for the asset revaluation:

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Debit Credit Account Titles and Explanation L, Capital V, Capital (S) (S) 4,000 Date 4,000 8,000 Equipment (To record the decrease on the amount of medical equipment for the revaluation)

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Step 3

Working Note:

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Calculation of share of partners in the revaluation loss Revaluation Loss = $8,000 Profit sharing ratio = 1:1 So each partner will bear $4,000. - (1) .... ..

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