Kristen Buie CLO HERE TO REVIEW LEARNING OBJECTIVES Assume that Partners A and B
ID: 2560488 • Letter: K
Question
Kristen Buie CLO HERE TO REVIEW LEARNING OBJECTIVES Assume that Partners A and B each report a Capital Account of $75.000 Partner C wants to join the partnership as an equal one-third partner. Because the partnership has been very profitable, Partners A and 8 require Partner C to contribute $150,000 in cash to the partnership in return for a one-third interest. Assume that Partners A and 8 share profts 60% and 40%, respectiedy prior to the rision of Prner C After admesion of Partner Cerney A and 8 retain their relative proportion of proft allocation after granting Partner Ca 30% profit-alocation interest. Use the Bonus Method to record the journal entry on the books of the partnership to reflect the admission of Partner C journal entry on the books of the partnership to reflect the admission of Partner C CapitalAceaunt Partner C Previous page Next pag9Explanation / Answer
Old Partnes capital before admission is $75,000
C is added for 1/3 rd share, old partners share of profits is 60 : 40 = 3: 2
C brings $150,000
As per bonus method
Total capital of the firm is $75,000+$150,000 = $225,000
C's share after admission is 225,000*1/3 = 75000
So, additional (150,000-75000) 75000 will be bomus added to old partners in 3:2 ratio i.e A - 45000, B - 30000
debit cash 150000
Credit A capital account 45000
credit B capital account 30000
Credit C capital account 75000
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