Question

Admitting New Partners Who Buy an Interest and Contribute Assets

The capital accounts of Trent Henry and Tim Chou have balances of $163,000 and $117,200, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $37,500 and one-fourth of Chou’s interest for $25,800. Clarke contributes $39,800 cash to the partnership, for which she is to receive an ownership equity of $39,800.

a1. Journalize the entry to record the admission of Gilbert. For a compound transaction, if an amount box does not require an entry, leave it blank.

a2. Journalize the entry to record the admission of Clarke.

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

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

Answer 1

Particulars	Trent Henry	Tim chou	LeAnne gilbert	Becky clarke	Total share Capital
Opening capital a/c	163,000	117,200			280,200
Gilbert adj	(32,600)	(23,440)	56,040
Clarke adj	(19,900)	(19,900)		39,800
Closing capital a/c	110,500	73,860	56,040	39,800	280200

Journal enteries:-

a1

Bank Alc Dr 57,440

To Gilbert capital A/c 56,040

To Goodwill A/c 1400

(Being capital introduced by the Gilbert)

a2

Bank A/c Dr 39,800

To Clarke capital A/c 39,800

(Being capital introduced by the clarke)

Note: 1 Gilbert Share 1/5 of henry share =163,000/5=32,600,actualy paid 37,500,difference will be the goodwill=37,500-32,600=4900 1/4 of chou share=117,200/4=29,300,actualy paid 25,800,difference will be the goodwill=25,800-29,300=3500 So, overall Goodwill amount= 4900 - 3500 = 1400 2. Clarke Share Ownership Equity = 39,800

b)

Partner	Capital Balance
Trent Henry	110,500
Tim Chou	73,860
LeAnne Gilbert	56,040
Becky Clarke	39,800