Question

The purchase of an interest by an outsider direclty from one or more of the existing partners of a partnership results in ___________________ .

A)No entries being made in the partnership's books.
B)An entry solely within the capital accounts.
C)An entry to record the receipt of the consideration paid.
D)An entry to revalue tangible and intangible assets or to use the bonus method to give effect to such undervaluations.
E)An entry to reflect payments to the applicable existing partner(s) and receipt of a capital contribution from the new partner.

Answer 1

E)An entry to reflect payments to the applicable existing partner(s) and receipt of a capital contribution from the new partner.

Step-by-step explanation:

As when a new partner is admitted there will be basic entries to record his capital, the consideration brought by him, and along with this if that the partner is admitted in the place of an old partner then the firm will also record the entries related to his retirement.

In the given instance, new partner buys the existing partner share outside only, and then, the existing partner have to tell the firm and accordingly the firm, will make entries for each.

Thus, Statement E is correct.