the struter partnership has total partners equity of $660,000, which is made up of main, capital, $462,000…

the struter partnership has total partners equity of $660,000, which is made up of main, capital, $462,000, and frist, capital, $198,000. the partners share net income and loss in a ratio of 77% to main and 23% to frist. on november 1, adison is admitted to the partnership and given a 20% interest in equity and a 20% share in any income and loss. prepare journal entries to record the admission of adison for a 20% interest in the equity and a 20% share in any income and loss under independent assumption. (1) record the admission of adison with an investment of $165,000 for a 20% interest in the equity and a 20% share in any income and loss. (2) record the admission of adison with an investment of $200,000 for a 20% interest in the equity and a 20% share in any income and loss. (3) record the admission of adison with an investment of $135,000 for a 20% interest in the equity and a 20% share in any income and loss.

the struter partnership has total partners equity of $660,000, which is made up of main, capital, $462,000, and frist, capital, $198,000. the partners share net income and loss in a ratio of 77% to main and 23% to frist. on november 1, adison is admitted to the partnership and given a 20% interest in equity and a 20% share in any income and loss. prepare journal entries to record the admission of adison for a 20% interest in the equity and a 20% share in any income and loss under independent assumption. (1) record the admission of adison with an investment of $165,000 for a 20% interest in the equity and a 20% share in any income and loss. (2) record the admission of adison with an investment of $200,000 for a 20% interest in the equity and a 20% share in any income and loss. (3) record the admission of adison with an investment of $135,000 for a 20% interest in the equity and a 20% share in any income and loss.

Answer

Explanation:

Step1: Record investment for equal - value case

When Addison invests $165,000 for a 20% interest and the investment is equal to the equity acquired. Debit: Cash $165,000 Credit: Addison, Capital $165,000

Step2: Record investment for bonus - to - old - partners case

When Addison invests $200,000 for a 20% interest. The total equity after Addison's investment is $660,000 + $200,000=$860,000. Addison's equity share should be $860,000×20% = $172,000. The bonus to old partners is $200,000 - $172,000 = $28,000, which is distributed between Main and Frist in their profit - sharing ratio. Debit: Cash $200,000 Credit: Addison, Capital $172,000 Credit: Main, Capital ($28,000×77%) $21,560 Credit: Frist, Capital ($28,000×23%) $6,440

Step3: Record investment for bonus - to - new - partner case

When Addison invests $135,000 for a 20% interest. The total equity after Addison's investment is $660,000 + $135,000=$795,000. Addison's equity share should be $795,000×20%=$159,000. The bonus to Addison is $159,000 - $135,000 = $24,000, which is deducted from Main and Frist in their profit - sharing ratio. Debit: Cash $135,000 Debit: Main, Capital ($24,000×77%) $18,480 Debit: Frist, Capital ($24,000×23%) $5,520 Credit: Addison, Capital $159,000

Answer:

(1)

Transaction General Journal Debit Credit
(1) Cash $165,000
Addison, Capital $165,000
(2)
Transaction General Journal Debit Credit
---- ---- ---- ----
(2) Cash $200,000
Addison, Capital $172,000
Main, Capital $21,560
Frist, Capital $6,440
(3)
Transaction General Journal Debit Credit
---- ---- ---- ----
(3) Cash $135,000
Main, Capital $18,480
Frist, Capital $5,520
Addison, Capital $159,000