Question

Exercise 12-12 S. Pagan and T. Tabor share income on a 7: 3 basis. They have capital balances of $120,000 and $70,000, respectively, when W. Wolford is admitted to the partnership. Prepare the journal entry to record the admission of W. Wolford under each of the following assumptions. Investment of $99,000 cash for a 30% ownership interest with bonuses to the existing partners. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Investment of $49,000 cash for a 30% ownership interest with a bonus to the new partner. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Answer 1

(a) Investment for 30% share = $99,000

Total capital after getting 99,000 = 120,000 + 70,000 + 99,000 = 289,000

Wolford share = 289,000 x 30% = $86,700

Balance (99,000 - 86,700) $12,300 will be shared by Pagan and Tabor in 7:3

Pagan's Account is credited by = 12,300 x 7/10 = 8,610

Tabor's Account is credited by = 12,300 x 3/10 = 3,690

Account title and explanation	Debit	Credit
Cash	99,000
Wolford Capital		86,700
Pagan Capital		8,610
Tabor Capital		3,690

(b) Investment for 30% share = $49,000

Total capital after getting 49,000 = 120,000 + 70,000 + 49,000 = 239,000

Wolford share = 239,000 x 30% = $71,700

Deficit (71,700 - 49,000) $22,700 will be contributed by Pagan and Tabor in 7:3

Pagan account is debited by = 22,700 x 7/10 = $15,890

Tabor Account is debited by = 22,700 x 3/10 = $6,810

Account title and explanation	Debit	Credit
Cash	49,000
Pagan Capital	15,890
Tabor Capital	6,810
Wolford Capital		71,700