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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Admitting new partners who buy an interest and contribute assets

The capital accounts of Trent Henry and Tini Chou have balances of $160,000 and $100,000, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $35,000 and one-fourth of Chou's interest for $29.000. Clarke contributes $90:000 cash to the partnership, for which she is to receive an ownership equity of $90,000.

  1. a. Journalize the entries to record the admission of (1) Gilbert and (2) Clarke.
  2. b. What are the capital balances of each partner after the admission of the new partners?

a. 1

To determine

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.

To record:  The journal entry for the admission of G

Explanation

W. N-1

Capital of TH = $160,000

Capital of TC = $100,000

Calculation of the portion of interest bought by G from TH and TC:

Portion from TH-

 Share of G =($160,000×15)

b.

To determine
The capital balances of each partner after the admission of new partners G and C.

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