Question

please answer all parts

The Distance Plus partnership has the following capital balances at the beginning of the current year Tiger (50% of profits and losses) Phil (2x) Ernie (30%) $ 105,000 75,000 90,000 Each of the following questions should be viewed independently. a. If Sergio invests $100,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus method is used. b. If Sergio invests $60,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus method is used. c. If Sergio invests $70,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the goodwill method is used. Complete this question by entering your answers in the tabs below. Required A Required B Required If Sergio invests $100,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the bonus

Answer 1

a.	Investment made=$ 100000
	Interest acquired=20%
	Total capital after investment=105000+75000+90000+100000=$ 370000
	Sergio's share in total capital=370000*20%=$ 74000
	Bonus distributed to existing partners=Investment made-Sergio's share=100000-74000=$ 26000
	(At their profit sharing ratio)
	Journal entry:
	Account titles					Debit	Credit
	Cash					100000
	Sergio capital						74000
	Tiger capital			(26000*50%)			13000
	Phil capital			(26000*20%)			5200
	Ernie capital			(26000*30%)			7800
	(Admission of new partner)
b.	Investment made=$ 60000
	Interest acquired=20%
	Total capital after investment=105000+75000+90000+60000=$ 330000
	Sergio's share in total capital=330000*20%=$ 66000
	Bonus taken from existing partners=Investment made-Sergio's share=66000-60000=$ 6000
	(At their profit sharing ratio)
	Journal entry:
	Account titles					Debit	Credit
	Cash					60000
	Tiger capital			(6000*50%)		3000
	Phil capital			(6000*20%)		1200
	Ernie capital			(6000*30%)		1800
	Sergio capital						66000
	(Admission of new partner)
c.	Investment made=$ 70000
	Interest acquired=20%
	Total capital after investment=105000+75000+90000+70000=$ 340000
	Value of business=Investment/Interest acquired=70000/20%=$ 350000
	Goodwill=Value of business-Total capital after investment=350000-340000=$ 10000
	(To be distributed to existing partners at their profit sharing ratio)
	Journal entry:
	Account titles					Debit	Credit
	Cash					70000
	Goodwill					10000
	Tiger capital			(10000*50%)			5000
	Phil capital			(10000*20%)			2000
	Ernie capital			(10000*30%)			3000
	Sergio capital						70000
	(Admission of new partner)