Admitting New Partner With Bonus L. Bowers and V. Lipscomb are partners in Elega

Question

Admitting New Partner With Bonus L. Bowers and V. Lipscomb are partners in Elegant Event Consultants. Bowers and LUpscomb share income equally. M. Ortiz will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $7,000. The capital balances of each partner are $75,500 and $105,000, respectively, prior to the revaluation. a. Provide the journal entry for the asset revaluation. For a compound transaction, Iif an amount box does not require an entry, leave it blank L. Bowers, Capital V. L M. Ortiz, Capital b. Provide the journal entry for Ortiz's admission under the following independent situations: 1. Ortiz purchased a 20% interest for $38,000. For a compound transaction, if an amount box does not require an entry, leave it blank. 2. Ortiz purchased a 30% interest for $95,000. For a compound transaction, if an amount box does not require an entry. leave it blank Check My Work 3 more Check My Work uses remaining. PreviousNext All work saved. Save and Exit Submit Assignment for Grading 1 F6 F9 10

Explanation / Answer

Answer a. Journal Entry Date Particulars Dr. Amt. Cr. Amt. a. L. Bowers, Capital      3,500.00 V. Lipscomb, Capital      3,500.00 Equipment      7,000.00 (record the revaluation of Equipment) Answer b-1. Admission of Ortiz Ortiz Investment = $38,000 - 20% Share Total Capital = $72,000 + $101,500 + $38,000 = $211,500 As per Bonus Method, Ortiz Capital = $211,500 X 20% = $42,300 Balance = $42,300 - $38,000 = $4,300 is a divided between the old partners in the old sharing ratio Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Cash    38,000.00 L. Bowers, Capital      2,150.00 V. Lipscomb, Capital      2,150.00 M. Ortiz, Capital    42,300.00 (record the admission of Ortiz) Answer b-2. Admission of Ortiz Ortiz Investment = $95,000 - 30% Share Total Capital = $72,000 + $101,500 + $95,000 = $268,500 As per Bonus Method, Ortiz Capital = $268,500 X 30% = $80,550 Balance = $98,000 - $80,550 = $17,450 is a divided between the old partners in the old sharing ratio Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Cash    98,000.00 M. Ortiz, Capital    80,550.00 L. Bowers, Capital      8,725.00 V. Lipscomb, Capital      8,725.00 (record the admission of Ortiz)

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