After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $44,920 and $60,890, respectively. Lewan Gorman is to be admitted to the partnership, contributing $32,080 cash to the partnership, for which he is to receive an ownership equity of $36,650. All partners share equally in income.Required:a.On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.b.What are the capital balances of each partner after the admission of the new partner?c.Why are tangible assets adjusted to current market prices, prior to admitting a new partner? Chart of Accounts CHART OF ACCOUNTSJackson, Barge, and GormanGeneral Ledger ASSETS110Cash111Petty Cash112Accounts Receivable113Allowance for Doubtful Accounts114Interest Receivable115Notes Receivable116Inventory117Office Supplies118Store Supplies119Prepaid Insurance120Land123Equipment124Accumulated Depreciation-Equipment129Asset Revaluations133Patent LIABILITIES210Accounts Payable211Salaries Payable213Sales Tax Payable214Interest Payable215Notes Payable EQUITY310Grayson Jackson, Capital311Grayson Jackson, Drawing312Harry Barge, Capital313Harry Barge, Drawing314Lewan Gorman, Capital315Lewan Gorman, Drawing REVENUE410Sales610Interest Revenue EXPENSES510Cost of Merchandise Sold520Salaries Expense521Advertising Expense522Depreciation Expense-Equipment523Delivery Expense524Repairs Expense529Selling Expenses531Rent Expense533Insurance Expense534Office Supplies Expense535Store Supplies Expense536Credit Card Expense537Cash Short and Over538Bad Debt Expense539Miscellaneous Expense710Interest Expense Journal a. On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.PAGE 10 JOURNALACCOUNTING EQUATION DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY1 2 3 4 Final Questions b. What are the capital balances of each partner after the admission of the new partner?PartnerBalanceGrayson Jackson Harry Barge Lewan Gorman c. Why are tangible assets adjusted to current market prices, prior to admitting a new partner?Tangible assets should be adjusted to current market prices so that the new partner any gains or losses from changes in market prices prior to being admitted. For example, if the market price of land doubled prior to admitting new partners, should realize the increase in the value of the land in their capital accounts prior to the new partners’ admission. Otherwise, would share in the increase in the market value of the land.

Part a) Journal Entry Particualrs Amt (Dr) ($) Amt (Cr) ($) Cash Dr 32080 Grayson…

Answered: After the tangible assets have been…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $44,920 and $60,890, respectively. Lewan Gorman is to be admitted to the partnership, contributing $32,080 cash to the partnership, for which he is to receive an ownership equity of $36,650. All partners share equally in income.

Required:

a.	On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
b.	What are the capital balances of each partner after the admission of the new partner?
c.	Why are tangible assets adjusted to current market prices, prior to admitting a new partner?

Chart of Accounts

CHART OF ACCOUNTS

Jackson, Barge, and Gorman

General Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
113	Allowance for Doubtful Accounts
114	Interest Receivable
115	Notes Receivable
116	Inventory
117	Office Supplies
118	Store Supplies
119	Prepaid Insurance
120	Land
123	Equipment
124	Accumulated Depreciation-Equipment
129	Asset Revaluations
133	Patent

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Grayson Jackson, Capital
311	Grayson Jackson, Drawing
312	Harry Barge, Capital
313	Harry Barge, Drawing
314	Lewan Gorman, Capital
315	Lewan Gorman, Drawing

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
531	Rent Expense
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

Journal

a. On December 31, journalize the entry to record the admission of Gorman, who is to receive a bonus of $4,570. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

Final Questions

b. What are the capital balances of each partner after the admission of the new partner?

Partner	Balance
Grayson Jackson
Harry Barge
Lewan Gorman

c. Why are tangible assets adjusted to current market prices, prior to admitting a new partner?

Tangible assets should be adjusted to current market prices so that the new partner any gains or losses from changes in market prices prior to being admitted. For example, if the market price of land doubled prior to admitting new partners, should realize the increase in the value of the land in their capital accounts prior to the new partners’ admission. Otherwise, would share in the increase in the market value of the land.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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