Question

AB Accounting LLP currently has two partners, Carol Anderson and Cathy Burns.
Anderson currently has a capital account balance, at book value, of $150,000. Anderson
receives 70% of the profits and losses of the partnership.
Burns currently has a capital account balance, at book value, of $80,000. Burns
receives 30% of the profits and losses of the partnership.
The partners believe that the fair market value of several assets are different than
the book values. The assets include:
	1) The FMV of Land is $40,000 higher than the book value.
	2) The FMV of Equipment is $20,000 higher than the book value.
	3) The FMV of Accounts Receivable is $10,000 lower than the book value.
The partners are considering admitting Barb Casper to the partnership. In exchange for
25% interest in capital and 20% interest in profits and losses, Casper would contribute
$90,000 in cash.
		$90,000. Using the Goodwill method prepare the journal entry(ies)
		to record the addition of Casper.

Answer 1

Revaluation A/c         Dr.	60000
To Land		40000
To Equipment		20000
Account receivable A/c        Dr.	10000
To Revaluation A/c		10000
A's Capital A/c           Dr.	35000
B's Capital A/c           Dr.	15000
To Revaluation A/c		50000
C's Capital A/c             Dr.	90000
To Cash		90000
Cash A/c                    Dr.	10000
To A's Capital A/c		7000
To B's Capital A/c		3000

Revaluation A/c
Account receivable	10000	Land	40000
		Equipment	20000
Partener's capital A/c	50000
A 50000 X 70% = 35000
B 50000 X 30% = 15000
	60000		60000

Partner's Capital A/c
Paricular	A	B	C	Particulars	A	B	C
Cash	7000	3000		Opening balances	150000	80000
				Profit on Revaluation	35000	15000
				Cash			90000
Closing balance	178000	92000	90000
	185000	95000	90000		185000	95000	90000

Calculation Adjusted capital
A 150000+35000	185000
B 80000+15000	95000
Old Total Capital	280000
Share of C	25%
C capital	90000
Total capital of old partners 90000/25*75	270000
Excess capital of old Partners 280000-270000	10000
10000 will be deducted in old profit sharing ratio