Saved onnect Homework Assignment Hel The Distance Plus partners hip has the foll

Question

Saved onnect Homework Assignment Hel The Distance Plus partners hip has the following capital balances at the beginning of the current year: Tiger (40% of profits Phil (40%) Ernie (20%) and losses) $140,000 110,000 125,000 Each of the following questions should be viewed independently o. If Sergio invests $180,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used b. If Sergio invests $150.0 00 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. c. If Sergio invests $130.000 in cash in the bu

Explanation / Answer

Ans:

Part A:

Total Capital After Investment = 140000+110000+125000+180000 = 555000

Sergio's Share = 555000*30% = 166500

Bonus Distributed to Existing Partners = 180000 - 166500 =13500

Journal Entry:

Cash Dr.

180000

Sergio, Capital Cr.

166500

Tiger, Capital Cr. (13500*40%)

5400

Phil, Capital Cr. (13500*40%)

5400

Ernie, Capital Cr. (13500*20%)

2700

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Part B:

Total Capital After Investment = 140000+110000+125000+150000 =525000

Sergio's Share = 525000*30% =157500

Bonus Taken from Existing Partners = 157500 - 150000 =7500

Journal Entry:

Cash Dr.

150000

Tiger, Capital Dr. (7500*40%)

3000

Phil, Capital Dr. (7500*40%)

3000

Ernie, Capital Dr. (7500*20%)

1500

Sergio, Capital Cr.

157500

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Ans:

Part A:

Total Capital After Investment = 140000+110000+125000+180000 = 555000

Sergio's Share = 555000*30% = 166500

Bonus Distributed to Existing Partners = 180000 - 166500 =13500

Journal Entry:

Cash Dr.

180000

Sergio, Capital Cr.

166500

Tiger, Capital Cr. (13500*40%)

5400

Phil, Capital Cr. (13500*40%)

5400

Ernie, Capital Cr. (13500*20%)

2700

-----

Part B:

Total Capital After Investment = 140000+110000+125000+150000 =525000

Sergio's Share = 525000*30% =157500

Bonus Taken from Existing Partners = 157500 - 150000 =7500

Journal Entry:

Cash Dr.

150000

Tiger, Capital Dr. (7500*40%)

3000

Phil, Capital Dr. (7500*40%)

3000

Ernie, Capital Dr. (7500*20%)

1500

Sergio, Capital Cr.

157500

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