Question

Demarco Lee invested $49,000 in the Camden & Sayler partnership for ownership equity of $49,000. Prior to the investment, equipment was revalued to a market value of $266,000 from a book value of $188,000. Kevin Camden and Chloe Sayler share net income in a 1:3 ratio.

Required:

a. Provide the journal entry for the revaluation of equipment.

For a compound transaction, if an amount box does not require an entry, leave it blank.

b. Provide the journal entry to admit Lee.

Answer 1

Journal entries for above Transactions

A.For Revaluation of Equipment

Equipment account..... Dr. $ 78,000

Kevin Camden capital account. $19500

Chloe sayler capital account $58,500

(Being revaluation of assets in event of admition of LEE against existing partners capital accounts)

B.For admit of Demarco Lee in partnership firm

Cash account..... Dr $49,000

Demarco Lee capital account $49,000

(Being cash invested by Lee for acquiring ownership in partnership firmby bringing cash )

Note

1. Difference between MARKET VALUE AND BOOK VALUE OF Equipment is $78000,This will be the revaluation amount of equipment, 78000 will be shared among existing partners in ratio of 1:3

As result of this

Mr. Kevin capital will increase by $19500

Mr.Chloe capital will increase by $58500