Chapter 12, Problem E12.19E

To determine

Accounting forAdmission of partner from firm:

The Accounting for admission of partner in the firm requires that the amount brought in by incoming partner shall be treated properly. The same shall be done based on following situation:

When the incoming partner takes his share of equity from individual partner by paying him money: In such situation, the incoming partner pay the amount to an individual partner to transfer his partnership interest in favor of incoming partner. In such situation, the amount paid is not recorded in firms books. However, the transfer of ownership is made by debiting the capital of individual partner and crediting the incoming capital with share transfer.

When the amount paid is according to total capital on the basis of shares acquired: The amount brought in by incoming partner is equal to capital amount which should have been brought in computed on the basis of total capital and his share of profit acquired, the simple journal entry for cash received in the firm and crediting the capital of incoming partner is made.

When the amount paid is more than capital which should have been paid: The amount of capital brought in is more than the amount of capital which should have been based on total capital of firm and profit acquired. The difference amount is bonus to old partners to be distributed among them in profit sharing ratio.

When the amount paid is less than capital which should have been paid: The amount of capital brought in is less than the amount of capital which should have been based on total capital of firm and profit acquired. The difference amount is bonus to incoming partners to be charged from old partners in profit sharing ratio.

Requirement 1-a:

Thecomputation of capital accounts balances after admission.

To determine

Requirement 1-b:

The computation of capital accounts balances after admission.

To determine

Requirement 1-c:

The computation of capital accounts balances after admission.

To determine

Requirement 2-a:

The Journal entry for the admission of partner.

To determine

Requirement 2-b:

The Journal entry for the admission of partner.

To determine

Requirement 2-c:

The Journal entry for the admission of partner.