=Admitting New Partner Who Contributes AssetsAfter the tangible assets have been adjusted to current market prices, the capital accounts of Elayne Summers and Murv Newcomb have balances of $99,000 and$149,000, respectively. Rose Clayton is to be admitted to the partnership, contributing $66,000 cash to the partnership, for which she is to-receive an ownership equity of$86,000. All partners share equally in income.a. Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $20,000. If an amount box does not require an entry, leave it blank.b. What are the capital balances of each partner after the admission of the new partner?Partner▼Elayne SummersMurv NewcombRose Clayton$Balancec. 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 partnerbeing admitted. For example, if the market price of land doubled prior to admitting new partners,land in their capital accounts prior to the new partners' admission. Otherwise,any gains or losses from changes in market prices prior toshould realize the increase in the value of thewould share in the increase in the market value of the land.

The admission of new partner refers to the situation when a new partner joins the existing…

tes Assets ter the tangible assets have been adjusted to current 49,000, respectively. Rose Clayton is to be admitted 6,000. All partners share equally in income. Journalize the entry to record the admission of Rose

tes Assets ter the tangible assets have been adjusted to current 49,000, respectively. Rose Clayton is to be admitted 6,000. All partners share equally in income. Journalize the entry to record the admission of Rose

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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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

=
Admitting New Partner Who Contributes Assets
After the tangible assets have been adjusted to current market prices, the capital accounts of Elayne Summers and Murv Newcomb have balances of $99,000 and
$149,000, respectively. Rose Clayton is to be admitted to the partnership, contributing $66,000 cash to the partnership, for which she is to-receive an ownership equity of
$86,000. All partners share equally in income.
a. Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $20,000. If an amount box does not require an entry, leave it blank.
b. What are the capital balances of each partner after the admission of the new partner?
Partner
▼
Elayne Summers
Murv Newcomb
Rose Clayton
$
Balance
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
being admitted. For example, if the market price of land doubled prior to admitting new partners,
land in their capital accounts prior to the new partners' admission. Otherwise,
any gains or losses from changes in market prices prior to
should realize the increase in the value of the
would share in the increase in the market value of the land.

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