Answered: partnership has total equity of…

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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A partnership has total equity of $491,000. Partnership equity consists of Green, Capital, $342,000, and Tan, Capital, $149,000. Net income and loss is shared in a ratio of 85% to Green and 15% to Tan. On December 1, the partnership accepts Brown as a new partner. Record the entry for Brown's admission under each separate situation. Record the admission assuming Brown makes an investment of $127,000 cash for a 20% interest in equity and a 20% share of any income or loss. Record the admission assuming Brown makes an investment of $179,000 cash for a 20% interest in equity and a 20% share of any income or loss. Record the admission assuming Brown makes an investment of $88,500 cash for a 20% interest in equity and a 20% share in any income or loss.

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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