Open with the following information for questi John and Kite share profits and l
ID: 2599154 • Letter: O
Question
Open with the following information for questi John and Kite share profits and losses in the ratio of 3:1, and have current total capital balance of $127,400. They agree to admit Smith as a partner with a 30% interest in the capital. 6. If Smith pays $67,200 and the bonus method is used, entries to record the admission of Smith would include a a. credit of $1,575 to Kite, Capital b. credit of $2,205 to Kite, Capital c. credit of $3.150 to Kite, Capital d. debit of $1,470 to Kite, Capital If Smith pays $67,200 and the goodwill method is used, entries to record the admission of Smithw include a 17. a. credit of $5,250 to Kite, Capital b. credit of $3, 150 to Kite, Capital c. credit of $7,350 to Kite, Capital d. credit of $2,450 to Kite, Capital 18, On January 1, 2014, Path Corporation (a U.S. company) acquired 100% of newly organized Sh Company, a French enterprise. The cumulative translation adjustment in the translated balance Shade has a balance of $1,200 credit and $3,500 credit on 12/31/14 and 12/31/15 respectively income on the 2015 translated income statement of Shade is $30,000. Path's complete equity journal entry to record the operating results of Shade for 2015 would include a a. debit of $32,300 to Investment in Shade b. credit of $27,700 to Investment in Shade c. credit of $3,500 to Cumulative Translation Adjustment d. debit of $34,700 to Investment in ShadeExplanation / Answer
Solution - 16: Bonus Method
Ratio of profit between john and Kite = 3:1
Total capital after new capital introduced by Smith = $127,400 + $67,200 = $194,600
Smith share in Partnership = 30%
Therefore required share of capital by Smith = 194600 * 30% = $58,380
Bonus Capital introduced by Smith = $67,200 - $58,380 = $8,820
Bonus capital will be distributed in John and Kite in ration of 3:1
John share = 8820/4*3 = $6,615
Kite Share = 8820/4*1 = $2,205
Therefore entry to record smith admission would include a credit of $2,205 to Kite Capital
Solution - 17: Goodwill Method
Ratio of profit between john and Kite = 3:1
Capital Introduced by Smith = $67,200
Smith share in Partnership = 30%
Therefore required partnership capital on the basis of capital introduced by Smith = $67,200/30% = $224,000
Total capital after new capital introduced by Smith = $127,400 + $67,200 = $194,600
Therefore Goodwill = $224,000 - $194,600 = $29,400
Goodwill will be distributed in John and Kite in ration of 3:1
John share = 29400/4*3 = $22,050
Kite Share = 8820/4*1 = $7,350
Therefore entry to record smith admission would include a credit of $7,350 to Kite Capital
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