1. Introduction: In partnership arrangements, income/loss earned by partnership firm is distributed amongst partner in the manner agreed upon. There can be retirement or admission of partners in existing partnership firms. To determine : Journal entries in different assumptions. Journal entries (Amount in $) S.No. Particulars Debit Amount Credit Amount (a) B's capital account 138,000 To N's capital account 138,000 (Being B retired and sell her interest to N and N admitted as new partner) (b) B's capital account 138,000 To S's capital account 138,000 (Being B retired and sell her interest to S and S admitted as new partner) (c) B's capital account 138,000 To Bank/Cash 138,000 (Being B retired and her interest paid in cash) (d) B's capital account 138,000 M's capital account 28,500 L's capital account 47,500 To Bank/Cash 214,000 (Being amount paid to B and excess amount paid shared by M and L in their new ratio 3:8) (e) B's capital account 138,000 To M's capital account 22,950 To L's capital account 38,250 To Bank/Cash 30,000 To Equipment 46,800 (Being amount paid to B and less amount paid shared by M and L in their new ratio 3:8) 2 Introduction: In partnership arrangements, income/loss earned by partnership firm is distributed amongst partner in the manner agreed upon. There can be retirement or admission of partners in existing partnership firms. To determine : Journal entries in different assumptions. Calculation of new ratio and capital adjustments: Amount to be paid at par to acquire 25%: ( 600 , 000 3 × 4 ) × 0.25 = $ 200 , 000 (a) R invests $200,000 - Since, R paid at par amount, no adjustment to be made. (b) R invests $145,000 - Since, R paid less amount, shortage to be met by all existing partners in the new ratio M 23% of (200,000-145,000) = 12,650 B 15% of (200,000-145,000) = 8,250 L 38% of (200,000-145,000) = 20,900 (c) R invests $262,000 - Since, R paid more amount, excess to be shared by all existing partners in the new ratio M 23% of (262,000-200,000) = 14,260 B 15% of (262,000-200,000) = 9,300 L 38% of (262,000-200,000) = 23,560 Journal Entries: (Amount in $) S.No. Particulars Debit Amount Credit Amount (a) Cash/Bank 200,000 To R's capital account 200,000 (Being new partner admitted with capital amount) (b) Cash/Bank 145,000 To R's capital account 145,000 (Being new partner admitted with capital amount) M's capital account 12,650 B's capital account 8,250 L's capital account 20,900 To R's capital account 41,800 (Being capital accounts adjusted on account of less capital bought by R) (c) Cash/Bank 262,000 To R's capital account 262,000 (Being new partner admitted with capital amount) R's capital account 47,120 To M's capital account 14,260 To B's capital account 9,300 To L's capital account 23,560 (Being capital accounts adjusted on account of more capital bought by R)

Connect Access Card for Financial Accounting: Information and Decisions

8th Edition

ISBN: 9781259662966

Author: John J Wild

Publisher: McGraw-Hill Education

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