Admission of new partner-Revaluation Assume that Partners A and B have Capital Accounts equal to $320,000 and $160,000, respectively. Partner C wants to join the partnership as one-third partner. Partner C contributes $680,000 in cash to the partnership in return for a one-third interest. Prior to the admission of Partner C, Partners A and B wish to revalue the long-term assets of the partnership. They obtain an appraisal of the land and building that indicates a current value of $800,000. Prior to the revaluation, the land and building are reported on the partnership balance sheet at $160,000. Record the journal entry on the books of the partnership to reflect the revaluation of the land and building and the admission of Partner C with a capital contribution of $680,000. Assume that despite the evidence of a previously unrecognized intangible asset, the partners do not wish to record the intangible asset. General Journal Description Land and Buildings Partner A, Capital Partner B, Capital To revalue land and buildings. Cash ♦ → ✓ Partner A, Capital Partner B, Capital Partner C, Capital ♦ To record purchase of partnership interest by C. ✓ ✓ Debit 0 x 0✓ 0✔ 0 x 0✓ 0 ✓ 0 ✓ Credit 0 ✓ 0 x 0 x 0✓ 0 x 0 x 0x
Admission of new partner-Revaluation Assume that Partners A and B have Capital Accounts equal to $320,000 and $160,000, respectively. Partner C wants to join the partnership as one-third partner. Partner C contributes $680,000 in cash to the partnership in return for a one-third interest. Prior to the admission of Partner C, Partners A and B wish to revalue the long-term assets of the partnership. They obtain an appraisal of the land and building that indicates a current value of $800,000. Prior to the revaluation, the land and building are reported on the partnership balance sheet at $160,000. Record the journal entry on the books of the partnership to reflect the revaluation of the land and building and the admission of Partner C with a capital contribution of $680,000. Assume that despite the evidence of a previously unrecognized intangible asset, the partners do not wish to record the intangible asset. General Journal Description Land and Buildings Partner A, Capital Partner B, Capital To revalue land and buildings. Cash ♦ → ✓ Partner A, Capital Partner B, Capital Partner C, Capital ♦ To record purchase of partnership interest by C. ✓ ✓ Debit 0 x 0✓ 0✔ 0 x 0✓ 0 ✓ 0 ✓ Credit 0 ✓ 0 x 0 x 0✓ 0 x 0 x 0x
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.
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Transcribed Image Text:Admission of new partner-Revaluation
Assume that Partners A and B have Capital Accounts equal to $320,000 and $160,000, respectively. Partner C wants to join the partnership as one-third partner. Partner C contributes $680,000 in cash to the
partnership in return for a one-third interest. Prior to the admission of Partner C, Partners A and B wish to revalue the long-term assets of the partnership. They obtain an appraisal of the land and building that
indicates a current value of $800,000. Prior to the revaluation, the land and building are reported on the partnership balance sheet at $160,000.
Record the journal entry on the books of the partnership to reflect the revaluation of the land and building and the admission of Partner C with a capital contribution of $680,000. Assume that despite the evidence of a
previously unrecognized intangible asset, the partners do not wish to record the intangible asset.
General Journal
Description
Land and Buildings
Partner A, Capital
Partner B, Capital
To revalue land and buildings.
Cash
♦
Partner A, Capital
Partner B, Capital
Partner C, Capital
To record purchase of partnership interest by C.
Debit
0 x
0✔
0
0 x
0✔
0✓
0
Credit
0
0 x
0 x
0
0 x
0 x
0 x
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