1. Compute each partner's equity on the books of the new partnership under the following plans: a. Hornes pays $100,000 for Novak's equity. Homes pays Novak directly. b. Hornes contributes $85,000 to acquire a 1/4 interest in the partnership. c. Homnes contributes $145,000 to acquire a 1/4 interest in the partnership. 2. Journalize the entries for admitting the new partner under plans a, b, and c.
1. Compute each partner's equity on the books of the new partnership under the following plans: a. Hornes pays $100,000 for Novak's equity. Homes pays Novak directly. b. Hornes contributes $85,000 to acquire a 1/4 interest in the partnership. c. Homnes contributes $145,000 to acquire a 1/4 interest in the partnership. 2. Journalize the entries for admitting the new partner under plans a, b, and c.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Question
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Homnes is admitted to the partnership of Rose & Novak. Prior to Hornes' admission, the partnership books show Rose's capital balance at $170,000 and Novak's at $85,000. Assume Rose and Novak share profits and losses equally.
Read the requirements.
Requirement 1. Compute each partner's equity on the books of the new partnership under the following plans: a. Hornes pays $100,000 for Novak's equity. Hornes pays Novak directly.
Begin by computing the partner's equity base for plan a. Homes pays $100,000 for Novak's equity. Hornes pays Novak directly. (Enter a share for each partner. Complete all input fields. For accounts with a $0 balance, make sure to enter "0" in the a
field. Enter negative amounts with a parentheses or minus sign.)
Plan A
Plan A: Partnership capital before admission of Hornes
Plan A: Effect on capital balance as a result of admission of Hornes
Plan A: Partnership capital after admission of Hornes
b. Hornes contributes $85,000 to acquire a 1/4 interest in the partnership. Compute each partner's equity. (Enter a share for each partner. Com
Plan B
Plan B: Partnership capital before admission of Hornes
Plan B: Effect on capital balance as a result of admission of Hornes.
Plan B: Partnership capital after admission of Hornes
Date
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Rose
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Rose
Novak
Debit
KIDD
Novak
Credit
Hornes
c. Homnes contributes $145,000 to acquire a 1/4 interest in the partnership. Compute each partner's equity. (Enter a share for each partner. Co
Plan C
Rose
Novak
Hornes
Plan C: Partnership capital before admission of Hornes
Plan C: Effect on capital balance as a result of admission of Hornes
Plan C: Partnership capital after admission of Hornes
Requirement 2. Journalize the entries for admitting the new partner under plans a, b, and c. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
a. Hornes pays $100,000 for Novak's equity. Hornes pays Novak directly.
Accounts and Explanation
Hornes
Requirements
1. Compute each partner's equity on the books of the new partnership under the
following plans:
a. Hornes pays $100,000 for Novak's equity. Homes pays Novak directly.
b. Homnes contributes $85,000 to acquire a 1/4 interest in the partnership.
c. Hornes contributes $145,000 to acquire a 1/4 interest in the partnership.
2. Journalize the entries for admitting the new partner under plans a, b, and c.
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