Concept explainers
a.
Identify the
a.
Explanation of Solution
Journal entry for the transaction
Date | Accounts and Explanation | Post Ref. | Debit ($) | Credit ($) |
Cash | $ 100,000 | |||
Person T's Capital | $ 12,500 | |||
Person P's Capital | $ 7,500 | |||
Person E's Capital | $ 5,000 | |||
Person S's Capital | $ 75,000 | |||
(To record admission of person S) |
Working note
Calculate total capital for new
Calculate capital balance of person S
Capital balance of person S is $75,000 and he has invested $100,000. So, $25,000 is the bonus amount which is distributed among the existing partners.
Calculation of distribution of bonus share among existing partners
Now
b.
Identify the journal entry which should be recorded if person S invests $60,000 in cash in the business for a 25 percent interest when bonus method is used.
b.
Explanation of Solution
Journal entry for the transaction
Date | Accounts and Explanation | Post Ref. | Debit ($) | Credit ($) |
Cash | $ 60,000 | |||
Person T's Capital | $ 2,500 | |||
Person P's Capital | $ 1,500 | |||
Person E's Capital | $ 1,000 | |||
Person S's Capital | $ 65,000 | |||
(To record admission of person S) |
Working note
Calculate total capital for new partnership
Calculate capital balance of person S
Capital balance of person S is $65,000 and he has invested $60,000. So, $5,000 is the loss amount which is distributed among the existing partners.
Calculation of distribution of loss share among existing partners
Now
c.
Identify the journal entry which should be recorded if person S invests $72,000 in cash in the business for a 25 percent interest when
c.
Explanation of Solution
Journal entry for the transaction
Date | Accounts and Explanation | Post Ref. | Debit ($) | Credit ($) |
Goodwill | $ 16,000 | |||
Person T's Capital | $ 8,000 | |||
Person P's Capital | $ 4,800 | |||
Person E's Capital | $ 3,200 | |||
(To distribution of goodwill) | ||||
Cash | $ 72,000 | |||
Person S's capital | $ 72,000 | |||
(To record admission of person S) | ||||
Working note
Calculate total capital for new partnership
Calculate implied capital of the business
Calculate goodwill
Goodwill is $16,000 and it is distributed among the existing partners in their profit sharing ratios.
Calculation of distribution of goodwill share among existing partners
Now
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Chapter 9 Solutions
FUNDAMENTALS OF ADVANCED ACCOUNTING >I
- The partnership of Tatum and Brook shares profits and losses in a 60:40 ratio respectively after Tatum receives a 10,000 salary and Brook receives a 15,000 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is: A. $40,000 B. $25,000 C. ($5,000) In addition, show the resulting entries to each partners capital account. Tatums capital account balance is $50,000 and Brooks is $60,000.arrow_forwardThandie and Marco are partners with capital balances of $60,000. They share profits and losses at 50% each. Chris contributes $30,000 to the partnership for a 1/3 share. What amount should the partnership record as a bonus to Chris? A. $20,000 B. $15,000 C. $10.500 D. $5,000arrow_forwardThe partnership of Arun, Margot, and Tammy has been doing well. Arun wants to retire and move to another state for a once-in-a-lifetime opportunity. The partners capital balances prior to Aruns retirement are $60,000 each. Prepare a schedule showing how Aruns withdrawal should be divided assuming his buyout is: A. $70,000 B. $45,000 C. $60,000. In addition, show the resulting entries to the capital accounts of each of the three.arrow_forward
- Thandie and Marco are partners with capital balances of $60,000. They share profits and losses at 50%. Chris contributes $90,000 to the partnership for a 1/3 share. What amount should the partnership record as an individual bonus to each of the old partners? A. $10,000 B. $7,000 C. $3,000 D. $20,000arrow_forwardThandie and Marco are partners with capital balances of $60,000. They share profits and losses at 50%. Chris contributes $30,000 to the partnership for a 1/3 share. What amount should Thandies capital balance in the partnership be? A. $60,000 B. $50,000 C. $45,000 D. $30,000arrow_forward
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