Accounting and Financial Reporting II 3. On June 30, a partnership has total par

Question

Accounting and Financial Reporting II

3. On June 30, a partnership has total partnership capital as follows: Partner #1, capital 100,000 Partner #2, capital 200,000 Total partnership capital 300,000 The partners allocate income and losses 40% to partner #1 and 60% to partner #2. On June 30, the partners agree to admit a new partner (partner #3) who pays $50,000 to the partnership for a 12% interest in the partnership. Prepare any necessary journal entries on the books of the partnership on June 30.

Explanation / Answer

Partner 1 Partner 2 Partner 3 Existing Profit Sharing ratio 40 60 100 New Revised profit sharing ratio 35.2 52.8 12 100 Existing capital 100000 200000 300000 Revised capital needed in the new revised profit sharing ratio 146667 220000 50000 416667 35.2 52.8 12 100 Contribution required from each partner 46667 20000 50000 116667 Amount in $ Date General Jounral Debit Credit Cash 116667 Partner #1 capital 46667 Partner #2 capital 20000 Partner #3 capital 50000 To record the additional capital brought in by partners in their revised profit sharing ratio

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