Question

The capital accounts of Trent Henry and Tim Chou have balances of $152,400 and $83,300, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $32,500 and one-fourth of Chou’s interest for $21,400. Clarke contributes $73,000 cash to the partnership, for which she is to receive an ownership equity of $73,000.

	Required:
A.	On December 31, journalize the entries to record the admission of (1) Gilbert and (2) Clarke. Refer to the Chart of Accounts for exact wording of account titles.
B.	What are the capital balances of each partner after the admission of the new partners?

CHART OF ACCOUNTSHenry, Chou, Gilbert, and ClarkeGeneral Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
113	Allowance for Doubtful Accounts
114	Interest Receivable
115	Notes Receivable
116	Inventory
117	Office Supplies
118	Store Supplies
119	Prepaid Insurance
120	Land
123	Equipment
124	Accumulated Depreciation-Equipment
129	Asset Revaluations
133	Patent

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Trent Henry, Capital
311	Trent Henry, Drawing
312	Tim Chou, Capital
313	Tim Chou, Drawing
314	LeAnne Gilbert, Capital
315	LeAnne Gilbert, Drawing
316	Becky Clarke, Capital
317	Becky Clarke, Drawing

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
531	Rent Expense
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

A. On December 31, journalize the entries to record the admission of (1) Gilbert and (2) Clarke. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

B. What are the capital balances of each partner after the admission of the new partners?

Partner	Capital Balance
Trent Henry, Capital
Tim Chou, Capital
LeAnne Gilbert, Capital
Becky Clarke, Capital

Answer 1

Answers

• Requirement ‘A’

--Amount within “( )” refers to “negative” amount or “Decrease”

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	31-Dec	Trent Henry, Capital	310	$32,500.00	$0.00	$0.00	$0.00	($32,500.00)
2		Tim Chou, Capital	312	$21,400.00	$0.00	$0.00	$0.00	($21,400.00)
3		LeAnne Gilbert, Capital	314	$0.00	$53,900.00	$0.00	$0.00	$53,900.00
		(Gilbert admitted)
4		Cash	110	$73,000.00	$0.00	$73,000.00	$0.00	$73,000.00
5		Becky Clarke, Capital	316	$0.00	$73,000.00	$0.00	$0.00
		(Clark admitted)

• Requirement ‘B’

Partner	Capital Balance
Trent Henry, Capital [152400 - 32500]	$119,900
Tim Chou, Capital [83300-21400]	$61,900
LeAnne Gilbert, Capital	$53,900
Becky Clarke, Capital	$73,000