Question

Exercise 189 Hu, Marcos, and Letterman share income on a 6:3:1 basis. They have capital balances of $80,000, $60,000, and $45,000, respectively, when Buffett is admitted to the partnership. Prepare the journal entry to record the admission of Buffett into the partnership if Buffett purchases one-half of Hu’s equity for $45,000; one-half of Marcos’s equity for $22,000; and one-third of Letterman’s equity for $18,000. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Debit Hu, 40,000, Marcos, 30,000 and Letterman 15,000 and credit Buffet, 85,000

Step-by-step explanation:

The question is to journalize the entry of admitting Buffet into the partnership

First, we know that Buffet bought 1/2 of Hu, 1/2 of Marcos and 1/3 of Letterman.

Has such Buffet bought the following number of shares

Hu = 1/2 x $80,000 = $40,000

Marcos = 1/2 of $60,000 = $30,000

Letterman = 1/3 of $45,000 = $15,000

Buffet= 85,000

Jounal Entry

Description Debit($) Credit($)

Hu, Capital 40,000

Marco, Capital 30,000

Letterman, Capital 15,000

Buffet, Capital $85,000

Being the admission of Buffet in to partnership.