Question

The Struter Partnership has total partners’ equity of $510,000, which is made up of Main, Capital, $400,000, and Frist, Capital, $110,000. The partners share net income and loss in a ratio of 80% to Main and 20% to Frist. On November 1, Adison is admitted to the partnership and given a 15% interest in the equity and a 15% share in any income and loss.Prepare the journal entry to record the admission of Madison under each of the following separate assumptions: Madisoninvests cash of (1) $90,000; (2) $120,000; and (3) $80,000.

Answer 1

a)

cash 90,000 debit

Adison 90,000 credit

b)

cash 120,000 debit

Adison 94,500 credit

Main 20,400 credit

First 5,100 credit

c)

cash 80,000 debit

Main 6,800 debit

First 1,700 debit

Adison 88,500 credit

Step-by-step explanation:

Main 400,000 80%

First 110,000 20%

400,000 + 110,000 + 90,000 = 600,000

600,000 x 15% = 90,000

the amoutn investment matches the proportional amount thus, we don't touch the other accounts

(2)

400,000 + 110,00 + 120,000 = 630,000

630,000 x 15% = 94,500

120,000 - 94,500 = 25,500

as the amount invested is above the proportional amount

we should make a contribution in behalf of the previous ownes

25,500 x 80% main 20,400

25,500 x 20% first 5,100

(3)

400,000 + 110,00 + 80,000 = 590,000

590,000 x 15% = 88,500

80,000 - 88,500 = -8,500

In this case there is a loss and should be distributed among the prevous partners:

8,500 x 80% main = 6,800

8,500 x 20% first = 1,700