Question

EX 12-10. Admitting new partners who buy an interest and contribute assets Obj. 3 Show Me How The capital accounts of Trent Henry and Tim Chou have balances of $160,000 and $100,000, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry's inter- est for $35,000 and one- fourth of Chou's interest for $29,000. Clarke con- tributes $90,000 cash to the partnership, for which she is to receive an own- ership equity of $90,000. Journalize the entries to record the admission of (1) Gilbert and (2) Clarke. What are the capital bal- ances of each partner after the admission of the new partners? Less than a minute: 46 pages left

Answer 1

Journal Entries

Serial number	Accounts title and description	Debit($)	Credit($)
(1)	Capital, Trent Henry [ 160,000 X1/5]	32,000
	Capital, Tim Chou [ 100,000 X 1/4]	25,000
	Capital, LeAnne Gilbert		57,000
	[New LeAnne Gilbert , bought the proportion of existing partners share interest ]
(2)	Cash	90,000
	Capital , Becky Clarke		90,000
	[Becky Clarke contributed cash as his share of capital]

Calculation for capital balance of partners after admission of new partners:

Trent Henry = $ 160,000 - $ 32,000 = $ 128,000

Tim Chou = $ 100,000 - $ 25,000 = $ 75,000

LeAnne Gilbert = $ 32,000 + $ 25,000 = $ 57,000

Becky Clarke = $ 90,000

Note : Amount actually paid by LeAnne Gilbert ( $ 35,000 and $ 29,000) for the purpose of purchasing interest from existing partners will not consider in partnership, because it is a personal transfer .

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