JK and MN are partners who share income and losses in the ratio of 3:2, respectively....

JK and MN are partners who share income and losses in the ratio of 3:2, respectively. On May 31, their capital balances were: JK $220,000 and MN $150,000. On that date, they agree to admit ST as a partner with a one quarter capital interest. ST invests $180,000 in the partnership under the bonus method:

a. What is JK’s capital balance after ST’s admittance?
b. What is MN’s capital balance after ST’s admittance
c. What capital amount is recorded for ST

Solutions

Expert Solution

Solution:

Total Capital amount after admission of ST :

= $220,000 + $150,000 + $180,000

= $550,000

1/4th capital interest to ST: = $550,000 x 1/4
= $137,500.

Bonus to old partners on admission of New Partner = $180,000 - $137,500
= $42,500.

Bonus is shared in the old partnership ratio.

JK's share of Bonus = $ 42,500 x 3/5
= $25,500

MN's share of Bonus = $42,500 x 2/5
= $17,000

a. JK's capital balance after ST's admission = $220,000 + $25,500
= $245,500

b. MN's capital balance after ST's admission = $150,000 + $17,000
= $167,000

c. Capital Amount recorded for ST = $137,500.

Note:

In the given question some matter is missed. I have a full question that is "JK and MN are partners who share income and losses in the ratio of 3:2, respectively. On May 31, their capital balances were: JK $220,000 and MN $150,000. On that date, they agree to admit ST as a partner with a one quarter capital interest. ST invests $180,000 in the partnership under the bonus method". I am answered for this. Once check it.

Thank you.

ekkarill92 answered 1 year ago

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