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Admitting New Partners Who Buy an Interest and Contribute Assets The capital accounts of Trent Henry...

Admitting New Partners Who Buy an Interest and Contribute Assets

The capital accounts of Trent Henry and Tim Chou have balances of $162,500 and $117,200, respectively. LeAnne Gilbert and Becky Clarke are to be admitted to the partnership. Gilbert buys one-fifth of Henry’s interest for $37,400 and one-fourth of Chou’s interest for $25,800. Clarke contributes $39,700 cash to the partnership, for which she is to receive an ownership equity of $39,700.

a1. Journalize the entry to record the admission of Gilbert. For a compound transaction, if an amount box does not require an entry, leave it blank.

Trent Henry, Capital
Tim Chou, Capital
LeAnne Gilbert, Capital

a2. Journalize the entry to record the admission of Clarke.

Cash
Becky Clarke, Capital

b. What are the capital balances of each partner after the admission of the new partners?

Partner Capital Balance
Trent Henry $
Tim Chou $
LeAnne Gilbert $
Becky Clarke $

Solutions

Expert Solution

The cash settlement (by Gilbert) happens between the partners (Henry and Chou)privately for the share received.Hence, cash settlement entries does not fall part of the partnership books of accounts

a1.

Debit Credit Calculation
Trent Henry, Capital 32500 162500*1/5
Tim Chou, Capital 29300 117200*1/4
LeAnne Gilbert, Capital 61800 sum

a2.

Debit Credit
Cash 39700
Becky Clarke, Capital 39700

b

A B C A+C-B
Partner Opening balance Debit REFERENCE Credit REFERENCE Capital Balance
Trent Henry             1,62,500.00 32,500.00 Entry a1 1,30,000.00
Tim Chou             1,17,200.00 29,300.00 Entry a1      87,900.00
LeAnne Gilbert                                -        61,800.00 Entry a1      61,800.00
Becky Clarke                                -        39,700.00 Entry a2      39,700.00
            2,79,700.00 61,800.00 1,01,500.00 3,19,400.00

jeff jeffy answered 7 months ago
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