Final answer:
The question regards the journal entries needed to adjust goodwill upon admitting a new partner, C, to an existing partnership. The detailed answer provides a general approach for these entries, emphasizing that specific values and terms of the agreement will affect the exact journal entries to be recorded.
Step-by-step explanation:
A student is asking for journal entries to adjust goodwill when a new partner, C, is admitted to a partnership where A and B are current partners sharing share profits in the ratio of 2:1. Goodwill is an intangible asset that represents the value of a business's brand name, customer base, customer relations, employee relations, and any patents or proprietary technology.
To adjust the goodwill upon C's admission, we must first determine the value of goodwill that needs to be adjusted. If the goodwill amount is not provided in the question, one must be assumed or calculated based on the existing partners' capital accounts and profit-sharing ratios. However, for this example, we are missing specific numbers to calculate the goodwill value.
Once the goodwill value is determined, the journal entries typically used to record C's admission and adjust for goodwill are as follows:
- Record C's capital contribution
(Debit) Cash or Bank
(Credit) C's Capital - Adjust goodwill among all partners (if needed based on valuation)
(Debit) A's Capital, B's Capital (in their profit sharing ratio)
(Credit) Goodwill (for total value) - New partner's share of goodwill (if the new partner is to compensate the existing partners for goodwill)
(Debit) Goodwill (for the new partner’s share)
(Credit) A's Capital, B's Capital (in their profit sharing ratio)
The specifics of the journal entries will depend on the agreed terms of C's admission, the value of the goodwill, and whether C is paying for his share or goodwill is being adjusted without additional payment.