Concept explainers
acalculation of amount to be invested by new partner
Admission of partner:changes in the membership of partnership occurs with the addition of new partners or disassociation of present partners. New partners are often a brings additional capital or needed expertise. A new partner can only be admitted with unanimous approval of all the existing partners, further public announcements are made about admission of partner. Section 306 of Uniform partnership act UPA 1997 states that a new partners are not liable for any liability incurred before new partners admitted. Thus, a new partner can be charged for partnership liabilities of existing partnership to the extent of capital contribution at the time of admission.
Requirement 1
the amount to be invested by E for one-third interest, when no
bJournal entry for admission of new partner
Admission of partner:changes in the membership of partnership occurs with the addition of new partners or disassociation of present partners. New partners are often a brings additional capital or needed expertise. A new partner can only be admitted with unanimous approval of all the existing partners, further public announcements are made about admission of partner. Section 306 of Uniform partnership act UPA 1997 states that a new partners are not liable for any liability incurred before new partners admitted. Thus, a new partner can be charged for partnership liabilities of existing partnership to the extent of capital contribution at the time of admission.
Requirement 2
the
cJournal entry for admission with given investment.
Admission of partner:changes in the membership of partnership occurs with the addition of new partners or disassociation of present partners. New partners are often a brings additional capital or needed expertise. A new partner can only be admitted with unanimous approval of all the existing partners, further public announcements are made about admission of partner. Section 306 of Uniform partnership act UPA 1997 states that a new partners are not liable for any liability incurred before new partners admitted. Thus, a new partner can be charged for partnership liabilities of existing partnership to the extent of capital contribution at the time of admission.
Requirement 3
the journal entry for admission of E if she invests $200,000 for 20 percent, and partner uses bonus method.
dliability of new partner’s for partnerships obligations prior to admission
Admission of partner:changes in the membership of partnership occurs with the addition of new partners or disassociation of present partners. New partners are often a brings additional capital or needed expertise. A new partner can only be admitted with unanimous approval of all the existing partners, further public announcements are made about admission of partner. Section 306 of Uniform partnership act UPA 1997 states that a new partners are not liable for any liability incurred before new partners admitted. Thus, a new partner can be charged for partnership liabilities of existing partnership to the extent of capital contribution at the time of admission.
Requirement 4
the new partner’s obligation on liabilities existed prior to admission of new partner
Want to see the full answer?
Check out a sample textbook solution
Chapter 15 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
- Arun and Margot want to admit Tammy as a third partner for their partnership. Their capital balances prior to Tammys admission are $50,000 each. Prepare a schedule showing how the bonus should be divided among the three, assuming the profit or loss agreement will be 1:3 once Tammy has been admitted and her contribution is: A. $20,000 B. $80,000 C. $50,000. In addition, show the resulting journal entries to each of the three partners capital accounts.arrow_forwardFor Industry H, determine each partner's share of income assuming the partners agree to share income by giving a $67,700 per year salary allowance to Price, a $126,100 per year salary allowance to Waterhouse, a $113,700 per year salary allowance to Coopers, a 15% interest on their initial capital investments, and the remaining balance shared equally. (Enter all allowances as positive values. Enter losses as negative values.) Important! Be sure to click the correct Industry at the top of the dashboard. Net income (loss) Salary allowances Balance of income (loss) Interest allowances Balance of income (loss) Balance allocated equally Balance of income (loss) Shares of each partner Initial partnership investments Net income Allocation of Partnership Income Price Total net income Total 0 Waterhouse $ $ PRICE, WATERHOUSE, AND COOPERS Statement of Partners' Equity For Year Ended December 31 Price Coopers 0 0 Waterhouse 0 0 0 $ For Industry H, prepare a statement of partners' equity for the…arrow_forwardJ Prepare adjusting entries to update the balances of some of the partnership accounts. Use "Capital Adjustments" account. If Merlita Pactanac will be admitted by purchasing 1/4 of the adjusted partners interest, how much is she going to pay and what is the journal entry to record her admission if the purchase is at book value. Kareen Labor, Lalaine Dajao and Leah Magno were partners in a business engaged in printing and publishing. The Statement of Financial Position reveals that their business obligations to outside creditors. has no Cash Accounts Receivable Inventories Equipment Total ASSETS 18-4 P120,000 150,000 260,000 300,000 P830,000 Instruction: PARTNERS' EQUITY Labor, Capital (30%) Dajao, Capital (20%) Magno, Capital (50%) Total P400,000 280,000 150,000 P830,000 On January 1, 20A, the partners agree to admit Jimwell Acenas as a new partner after considering the following revaluation and adjustments: 1. Allowance for doubtful accounts of P20,000 is to be established for…arrow_forward
- After the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $64,900 and $86,500, respectively. Lewan Gorman is to be admitted to the partnership, contributing $43,300 cash to the partnership, for which he is to receive an ownership equity of $50,500. All partners share equally in income. a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $7,200. If an amount box does not require an entry, leave it blank. Cash Grayson Jackson, Capital Harry Barge, Capital Lewan Gorman, Capital b. What are the capital balances of each partner after the admission of the new partner? Partner Balance Grayson Jackson $ Harry Barge $ Lewan Gorman $arrow_forwardYuanne Sipp and Letitia Grimes share partnership income on a 3:2 basis. They have capital balances of $550,000 and $284,000, respectively, when Tammy Tuck is admitted to the partnership. Prepare the journal entry to record the admission of Tammy Tuck assuming Tuck invests $240,000 for a 25% ownership interest. (Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.) Account Titles and Explanation Debit Credit select an account title enter a debit amount enter a credit amount select an account title enter a debit amount enter a credit amount select an account title enter a debit amount enter a credit amount select an account title…arrow_forwardanswer the following, provide a solution.arrow_forward
- 2. Recording investment of assets and liabilities in a partnership. Sarah Punter operates a sole proprietorship business that sells golf equipment. In 2019, Punter agrees to transfer her assets and liabilities to a partnership that will operate The Golf Shop. Punter will own a two-thirds interest in the capital of the partnership. The agreed-upon values of assets and liabilities to be transferred follow: Total accounts receivable of $260,000 will be transferred and approximately $10,000 of these accounts may be uncollectible Merchandise inventory, $212,000 Furniture and fixtures, $96,000 Accounts payable, $37,000Required: Record the receipt of the assets and liabilities by the partnership in the general journal.arrow_forwardAfter the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $64,900 and $86,500, respectively. Lewan Gorman is to be admitted to the partnership, contributing $43,300 cash to the partnership, for which he is to receive an ownership equity of $50,500. All partners share equally in income a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $7,200. 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 Grayson Jackson Harry Barge Lewan Gorman 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 admitted. For example, if the market price of land doubled prior to admitting new partners, their capital accounts prior to the new partners'…arrow_forwardAfter the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $76,000 and $122,000, respectively. Lewan Gorman is to be admitted to the partnership, contributing $51,000 cash to the partnership, for which he is to receive an ownership equity of $66,000. All partners share equally in income. a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $15,000. 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 Balance Grayson Jackson Harry Barge Lewan Gorman 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 any gains or losses from changes in market prices prior to being admitted. For example, if the market price of land doubled prior to admitting…arrow_forward
- Higgins is admitted to the partnership of Rengel & Novak. Prior to her admission, the partnership books show Rengel's capital balance at $160,000 and Novak's at $80,000. Assume Rengel and Novak share profits and losses equally. Read the requirements. .... . Requirement 1. Compute each partner's equity on the books of the new partnership under the following plans: a. Higgins pays $95,000 for Novak's equity. Higgins pays Novak directly. Begin by computing the partner's equity base for plan a. Higgins pays $95,000 for Novak's equity. Higgins pays Novak directly. (Enter a share for each partner. Complete all answer boxes. For accounts with a $0 balance, make sure to enter "0" in the appropriate cell. Enter negative amounts with a parentheses or minus sign.) Plan A Rengel Novak Higgins Plan A: Partnership capital before admission of Higgins Requirements Plan A: Effect on capital balance as a result of admission of Higgins Plan A: Partnership capital after admission of Higgins 1. Compute…arrow_forwardAdmitting 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 $82,000 and $131,000, respectively. Rose Clayton is to be admitted to the partnership, contributing $55,000 cash to the partnership, for which she is to receive an ownership equity of $72,000. All partners share equally in income. a. Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $17,000. If an amount box does not require an entry, leave it blank. Cash Elayne Summers, Capital Murv Newcomb, Capital Rose Clayton, Capital Feedback ►Check My Work b. What are the capital balances of each partner after the admission of the new partner? Partner Elayne Summers Murv Newcomb Rose Clayton 55,000 $ Balance 94,500 X $ 143,500 X 30,000 Xarrow_forwardAdmitting 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 $116,000 and $197,000, respectively. Rose Clayton is to be admitted to the partnership, contributing $78,000 cash to the partnership, for which she is to receive an ownership equity of $101,000. All partners share equally in income. a. Journalize the entry to record the admission of Rose Clayton, who is to receive a bonus of $23,000. 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 any gains or losses from changes in market prices prior to being admitted. For example,…arrow_forward
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College