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Admitting new partner who contributes assets After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $45,000 and $60,000, respectively. Austin Neel is to be admitted to the partnership, contributing $50,000 cash to the partnership, for which he is to receive an ownership equity of $35,000. All partners share equally in income. a. Journalize the entry to record the admission of Neel, who is to receive a bonus of $5,000. b. What are the capital balances of each partner after the admission of the new partner? c. Why are tangible assets adjusted to current market prices prior to admitting a new' partner?

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 12, Problem 12.11EX
Textbook Problem

Admitting new partner who contributes assets

After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $45,000 and $60,000, respectively. Austin Neel is to be admitted to the partnership, contributing $50,000 cash to the partnership, for which he is to receive an ownership equity of $35,000. All partners share equally in income.

  1. a. Journalize the entry to record the admission of Neel, who is to receive a bonus of $5,000.
  2. b. What are the capital balances of each partner after the admission of the new partner?
  3. c. Why are tangible assets adjusted to current market prices prior to admitting a new' partner?

Expert Solution

a.

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 N’s admission to the partnership, who receives a bonus of $5,000.

Explanation of Solution

The journal entry for N’s admission to the partnership, who receives a bonus of $5,000 is as follows:

Date Account Titles and Explanation Debit ($) Credit ($)
Cash $30,000
Expert Solution

(b)

To determine
The capital balance of each partner after the admission of the new partner.

Expert Solution

(c)

To determine

To explain: The reason of adjusting tangible assets prior to the admission of new partner.

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Chapter 12 Solutions

Accounting
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