Question

Demarco Lee invested $25,000 in the Camden & Sayler partnership for ownership equity of $25,000. Prior to the investment, equipment was revalued to a market value of $222,000 from a book value of $180,000. Kevin Camden and Chloe Sayler share net income in a 1:3 ratio. Required: a. Provide the journal entry for the revaluation of equipment. For a compound transaction, if an amount box does not require an entry, leave it blank. b. Provide the journal entry to admit Lee.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Equipment Dr, $42,000 ($222,000 - $180,000)

To Kevin Camden-Capital $10,500 ($42,000 × 1 ÷ (1 + 3))

To Chloe Sayler-Capital $31,500 ($42,000 × 3 ÷ (1 + 3))

(Being revaluation of equipment is credited)

Here we debited the equipment as it increased the assets and we credited the Kevin Camden-Capital and Chloe Sayler-Capital as it also increased the equity

2. Cash Dr, $25,000

To Demarco Lee-Capital $25,000

(Being admission is recorded)

Here we debited the cash as it increased the assets and we credited the Demarco Lee-Capital as it also increased the equity