The Distance Plus partnership has the following capital balances at the beginnin
ID: 2407861 • Letter: T
Question
The Distance Plus partnership has the following capital balances at the beginning of the current year:
Each of the following questions should be viewed independently.
A. If Sergio invests $100,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the admission of new partner under bonus method.
B. If Sergio invests $75,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the admission of new partner under bonus method.
C. If Sergio invests $90,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the goodwill method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the entry for goodwill allocation, during the admission of a new partner.
Tiger (40% of profits and losses) $ 80,000 Phil (40%) 50,000 Ernie (20%) 65,000Each of the following questions should be viewed independently.
A. If Sergio invests $100,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the admission of new partner under bonus method.
Transaction General Journal Debit Credit Required AB. If Sergio invests $75,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the admission of new partner under bonus method.
Transaction General Journal Debit Credit Required BC. If Sergio invests $90,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the goodwill method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the entry for goodwill allocation, during the admission of a new partner.
Transaction General Journal Debit Credit Required CExplanation / Answer
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a. Tiger 80000 Phil 50000 Ernie 65000 Sergio 100000 Total Capital 295000 Sergio's Capital Portion (30%) 300000*30% 90000 Sergio Paid Cash 100000 Bonus 100000-90000 10000 Will be giving to exising partners in Profit sharing ratio 4:4:2 Cash Debit 100000 Sergio, Capital Credit 90000 Tiger, Capital Credit 4000 10000*4/10 Phil, Capital Credit 4000 10000*4/10 Ernie, Capital Credit 2000 10000*2/10 b. Tiger 80000 Phil 50000 Ernie 65000 Sergio 75000 Total Capital 270000 Sergio's Capital Portion (30%) 270000*30% 81000 Sergio Paid Cash 75000 Bonus to be take from old partner 81000-75000 -6000 Will be giving to exising partners in Profit sharing ratio 4:4:2 Cash Debit 75000 Tiger, Capital Debit 2400 6000*4/10 Phil, Capital Debit 2400 6000*4/10 Ernie, Capital Debit 1200 6000*2/10 Sergio, Capital Credit 81000 c. Tiger 80000 Phil 50000 Ernie 65000 Sergio 90000 Total Capital 285000 Implied Value of partnership (90000/30%) 300000 Hence Goodwill 300000-285000 15000 goodwill of $15,000 must be recognized with the offsetting allocation to the original partners based on their profit and loss ratio: Tiger—$6,000 (40%), Phil— $6,000 (40%), and Ernie—$3,000 (20%) Goodwill Account Debit 15000 Tiger, Capital Credit 6000 Phil, Capital Credit 6000 Ernie, Capital Credit 3000 Cash Debit 72000 Sergio, Capital Credit 72000Related Questions
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