Question

Admitting New Partners Who Buy an Interest and Contribute AssetsThe capital accounts of Trent Henry and Tim Chou have balances of $160,000 and $100,000, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $35,000 and one-fourth of Chou’s interest for $29,000. Clarke contributes $90,000 cash to the partnership, for which she is to receive an ownership equity of $90,000.a. 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.b. Journalize the entry to record the admission of Clarke.c. What are the capital balances of each partner after the admission of the new partners?

Answer 1

Step-by-step explanation:

The journal entries and the computations are shown below:

a. Henry's Capital A/c Dr $32,000

Chou's Capital A/c Dr $25,000

To Gilbert's Capital A/c $57,000

(Being the admission of Gilbert is recorded)

The calculation would be

For Trent Henry

= Capital balance × interest buyed

= $160,000 × 1 ÷ 5

= $32,000

For Tim Chou

= Capital balance × interest buyed

= $100,000 × 1 ÷ 4

= $25,000

b. Cash A/c Dr $90,000

To Clarke's Capital A/c $90,000

(Being the contributed amount is recorded)

c. Capital balances would be

Particulars Henry Chou Gilbert Clarke

Capital before admission $160,000 $100,000

Amount after Admission -$32,000 -$25,000 $57,000 $90,000

New Capital balances $128,000 $75,000 $57,000 ,$90,000