Question

Admitting New Partners Who Buy an Interest and Contribute Assets The capital accounts of Trent Henry and Tim Chou have balances of $177,000 and $127,600, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $40,700 and one-fourth of Chou’s interest for $28,100. Clarke contributes $43,200 cash to the partnership, for which she is to receive an ownership equity of $43,200. 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.

Journalize the entry to record the admission of Clarke.

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

Answer 1

Ans:

A1).

	Henry	Chou
Share Capital (at the time of admission)	$177,000	$127,600
Interest Bought by Gilbert	1/5	1/4
Share Capital Bought by Gilbert	$35,400	$31,900

We need to debit Henry's Capital account with $35,400, Chou's capital account with $31,900 and credit Gilbert's capital account with $67,300.

Journal Entry :-

Account Title and explanation	Debit $	Credit $
Henry's Capital a/c Dr.	$35,400
Chou's Capital a/c Dr.	$31,900
To Gilbert's Capital a/c		$67,300
(Being capital introduced by Gilbert)

A2).Journal Entry:

As clarke contributes $90000 to the partnership, the journal entry will be :-

Account Title and explanation	Debit $	Credit $
Cash A/c Dr.	$43,200
To Claeke's Capital a/c		$43,200
(Being capital introduced by clarke)

B. All Partners Capital Balance :-

Particulars	Henry	Chou	Gilbert	Clarke
Capital before admission	$177,000	$127,600
At the time of Admission	-$35,400	-$31,900	$67,300	$43,200
New Capital	$141,600	$95,700	$67,300	$43,200