Question

Required information [The following information applies to the questions displayed below.) Meir, Benson, and Lau are partners and share income and loss in a 1:4:5 ratio (in percents: Meir, 10%; Benson, 40%; and Lau, 50%). The partnership's capital balances are as follows: Meir, $33,000; Benson, $139,000; and Lau, $178,000. Benson decides to withdraw from the partnership, 2. Assume that Benson does not retire from the artnership described in Part 1. Instead, Rhode is admitted to the partnership on February 1 with a 25% equity. Prepare journal entries to record Rhode's entry into the partnership under each separate assumption: Rhode invests (a) $116,667; (6) $85,167; and ($152,834. (Do not round your intermediate calculations.) View transaction list Journal entry worksheet 1 2 3 Record the admission of Rhode with an investment of $116,667 for a 25% interest in the equity. Note: Enter debits before credits

Answer 1

Answer:

2	Ref.	Account titles and explanation					Debit	Credit
	a.	Cash					116667
		Rhode's capital						116667
		(Note:1)
		(To record Rhode's admission and bonus)
	b.	Cash					85167
		Meir's capital					2362.5
		Benson's capital					9450
		Lau's capital					11812.5
		Rhode's capital						108792
		(Note:2)
		(To record Rhode's admission and bonus)
	c.	Cash					152834
		Meir's capital						2712.5
		Benson's capital						10850
		Lau's capital						13562.5
		Rhode's capital						125709
		(Note:3)
		(To record Rhode's admission and bonus)
	Note:1
	Total equity=Total of old partner's capital+Contribution by new partner=33000+139000+178000+116667=$ 466667
	Share of Rhode in Equity=Total equity*25%=466667*25%=$ 116667
	Bonus received (paid) by new partner=Cash paid by new partner-Share in equity=116667-116667=0
	Note:2
	Total equity=Total of old partner's capital+Contribution by new partner=33000+139000+178000+85167=$ 435167
	Share of Rhode in Equity=Total equity*25%=435167*25%=$ 108792
	Bonus received (paid) to new partner=Cash paid by new partner-Share in equity=85167-108792=$ -23625
	Bonus to be paid by old partners in the ratio 1:4:5
	Meir	23625*1/10	2362.5
	Benson	23625*4/10	9450
	Lau	23625*5/10	11812.5
	Note:3
	Total equity=Total of old partner's capital+Contribution by new partner=33000+139000+178000+152834=$ 502834
	Share of Rhode in Equity=Total equity*25%=502834*25%=$ 125709
	Bonus received (paid) by old partners=Cash paid by new partner-Share in equity=152834-125709=$ 27125
	Bonus to be received by old partners in the ratio 1:4:5
	Meir	27125*1/10	2712.5
	Benson	27125*4/10	10850
	Lau	27125*5/10	13562.5
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