The capital balances and profits- and loss-sharing percentages for the Sip, Jog, and Run partnership at December 31, 2016, are as follows: Sip capital (30%) $160,000 Jog capital (50%) $180,000 Run capital (20%) $140,000 The partners agree to admit Wal into the partnership on January 1, 2017, for a 20 percent interest in the capital and income of the business. Required Prepare the journal entry or entries to record Wal’s admission to the partnership assuming that he invests $100,000 in the partnership for the 20 percent interest and that partnership capital is revalued. Assume that the book value of partnership assets equals the fair value. Prepare the journal entry or entries to record Wal’s admission to the partnership assuming that he invests $140,000 in the partnership for the 20 percent interest and that partnership capital is revalued.

Question

The capital balances and profits- and loss-sharing percentages for the Sip, Jog, and Run partnership at December 31, 2016, are as follows:

Sip capital (30%)

$160,000

Jog capital (50%)

$180,000

Run capital (20%)

$140,000

The partners agree to admit Wal into the partnership on January 1, 2017, for a 20 percent interest in the capital and income of the business.

Required

  1. Prepare the journal entry or entries to record Wal’s admission to the partnership assuming that he invests $100,000 in the partnership for the 20 percent interest and that partnership capital is revalued. Assume that the book value of partnership assets equals the fair value.

  2. Prepare the journal entry or entries to record Wal’s admission to the partnership assuming that he invests $140,000 in the partnership for the 20 percent interest and that partnership capital is revalued.

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