Partnership It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio. To record: The journal entry for N’s admission to the partnership, who receives a bonus of $5,000.

Question

Admitting New Partner Who Contributes Assets After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $87,000 and $148,000, respectively. Austin Neel is to be admitted to the partnership, contributing $58,000 cash to the partnership, for which he is to receive an ownership equity of $75,000. All partners share equally in income. a. Journalize the entry to record the admission of Neel, who is to receive a bonus of $17,000. For a compound transaction, 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 Brad Paulson Drew Webster Austin Neel 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 to being admitted. does not share in any gains or losses from changes in market prices

Answer 1

Question

Chapter 12, Problem 12.11EX

a.

To determine

Partnership

It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio.

To record: The journal entry for N’s admission to the partnership, who receives a bonus of $5,000.

(b)

To determine

The capital balance of each partner after the admission of the new partner.

(c)

To determine

To explain: The reason of adjusting tangible assets prior to the admission of new partner.

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