Question

At April 30, partners’ capital balances in PDL Company are G. Donley $52,000, C. Lamar $48,000, and J. Pinkston $18,000. The income sharing ratios are 5:4:1, respectively. On May 1, the PDLT Company is formed by admitting J. Terrell to the firm as a partner.

Question: A Journalize the admission of Terrell under each of the following independent assumptions.
(1) Terrell purchases 50% of Pinkston’s ownership interest by paying Pinkston $16,000 in cash.
(2) Terrell purchases 331/3% of Lamar’s ownership interest by paying Lamar $15,000 in cash.
(3) Terrell invests $62,000 for a 30% ownership interest, and bonuses are given to the old partners.
(4) Terrell invests $42,000 for a 30% ownership interest, which includes a bonus to the new partner.

Answer 1

To journalize the admission of J. Terrell to PDL Company, you need to record the transaction in the partners' capital accounts. The journal entries will depend on the terms of Terrell's admission.

Step-by-step explanation:

To journalize the admission of J. Terrell to PDL Company, we need to record the transaction in the partners' capital accounts. The journal entries will depend on the terms of Terrell's admission. Here are the journal entries for each assumption:

(1) Terrell purchases 50% of Pinkston's ownership interest:

• Pinkston's capital account: Debit $16,000
• Terrrell's capital account: Credit $16,000
• Cash: Credit $16,000

(2) Terrell purchases 33 1/3% of Lamar's ownership interest:

• Lamar's capital account: Debit $15,000
• Terrrell's capital account: Credit $15,000
• Cash: Credit $15,000

(3) Terrell invests $62,000 for a 30% ownership interest:

• Terrrell's capital account: Credit $62,000
• Cash: Credit $62,000

(4) Terrell invests $42,000 for a 30% ownership interest, including a bonus:

• Terrrell's capital account: Credit $42,000
• Bonuses expense: Debit $20,000
• Cash: Credit $62,000