QUESTION 4-Partner Admission Cornell and Roberts are partners who agree to admit

Question

QUESTION 4-Partner Admission Cornell and Roberts are partners who agree to admit Stanley to their partnership. Cornell has a capital balance of $80,000 and Roberts has a capital balance of $120,000.Cornell and Roberts share net income in the ratio of 7:3 respectively. Prepare journal entries to admit Stanley to the partnership based on the following independent agreements. Round all amounts to the nearest dollar. a) Stanley invests $150,000 cash into the partnership for a 20% interest. b) Stanley invests $150,000 cash into the partnership for a 45% interest. c) Stanley purchases one-quarter of Cornell's capital for $35,000. Calculations:

Explanation / Answer

JOURNAL ENTRIES DATE ACCOUNTS TITLE AND EXPLANATIONS DEBIT $ CREDIT $ Case-a Cash Account Dr. 150,000        Stanley Capital 70,000        Cornell Capital 56,000        Roberts capital 24,000 Note: Capital of partners before admission 200,000 Capital of new partner 150,000 Total capital of firm after admission 350,000 Share of new partner @20% 20 Capital of New partner should have been 70,000 Bonus to old partners 80,000 Case-b Cash Account Dr. 150,000 Cornell capital Dr. 5250 Robert Capital Dr. 2250      Stanley Capital 157,500 Note: Capital of partners before admission 200,000 Capital of new partner 150,000 Total capital of firm after admission 350,000 Share of new partner @20% 45 Capital of New partner should have been 157,500 Bonus to new partner 7,500 Case-C: Cornell Capital Dr. 20000      Stanley Capital (80,000*25%) 20000

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