Assume that Partners A and B have Capital Accounts equal to $600,000 and $300,00

Question

Assume that Partners A and B have Capital Accounts equal to $600,000 and $300,000, respectively. Partner C wants to join the partnership as one-third partner. Partner C contributes $1,275,000 in cash to the partnership in return for a one-third interest. Prior to the admission of Partner C, Partners A and B wish to revalue the long-term assets of the partnership. They obtain an appraisal of the land and building that indicated a current value of $1.5 million. The land and building are currently reported on the partnership balance sheet at $300,000.

Required: Record the journal entry on the books of the partnership to reflect the revaluation of the land and building and the admission of Partner C with a capital contribution of $1,275,000. Assume that despite the evidence of a previously unrecognized intangible asset, the partners do not wish to record the intangible asset. Assume that the partners allocate profits equally.

Explanation / Answer

journal entries

Description Debit Credit Land & building $1,200,000 To A's capital $600,000 To B's capital $600,000 Cash $1,275,000 To C's capital $1,275,000

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