Dan and Ellie share partnership profits and losses at 70% and 30%, respectively. The partners agree to admit Fran into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Fran are: Dan (70%) $ 800,000 Ellie (30%) 400,000 Total $ 1,200,000 Part 1: Prepare the journal entry(s) for the admission of Fran to the partnership, assuming Fran invested $800,000 for the ownership interest and that this is a fair price for that share of the partnership to be acquired. Fran paid the money directly to Dan and to Ellie for 50% of each of their respective capital interests. The partnership records goodwill. Part 2: Prepare the journal entry(s) for the admission of Fran to the partnership, assuming Fran invested $1,000,000 for the ownership interest. Fran paid the money to the partnership for a 50% interest in capital and earnings. Assume the valuation is based on the capital of the current partnership, which is fairly valued. The partnership records goodwill.
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.
Dan and Ellie share
Dan (70%) $ 800,000
Ellie (30%) 400,000
Total $ 1,200,000
Part 1: Prepare the
Part 2: Prepare the journal entry(s) for the admission of Fran to the partnership, assuming Fran invested $1,000,000 for the ownership interest. Fran paid the money to the partnership for a 50% interest in capital and earnings. Assume the valuation is based on the capital of the current partnership, which is fairly valued. The partnership records goodwill.
Part 3: Prepare the journal entry(s) for the admission of Fran to the partnership, assuming Fran invested $1,400,000 for the ownership interest and that this is a fair price for that share of the partnership to be acquired. Fran paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill
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