Question

Jane, Castle, and Sean are partners who share income and loss in a 4:2:2 ratio. The partnership’s capital balances are as follows: Jane $292,000; Castle, $114,000; and Sean, $194,000. Conner is admitted to the partnership on March 1 with a 25% equity. Prepare the journal entries to record Conner’s entry into the partnership under each of the following seperate assumptions: Conner invests (a) $200,000; (b) $180,000; and (c) $240,000.

Answer 1

Note 1:
Total partners capital ($292,000+$114,000+$194,000)	600000
Conner Capital	180,000
Total capital	780000
25% conner share of capital ($780,000*25%)	195000
Conner Capital contribution	180,000
Balance amount of excess contribution	15,000

Note 2:
Total partners capital ($292,000+$114,000+$194,000)	600000
Conner Capital	240,000
Total capital	840000
25% conner share of capital ($780,000*25%)	210000
Conner Capital contribution	240,000
Balance amount of excess contribution	-30,000

	Journal entries
Date	Particulars	Debit	Credit
(A)	Cash	$200,000
	Conner Capital (800,000* 0.25)		$200,000
(B)	Cash	$180,000
	Jane Capital (15,000*4/8) Refer note 1	$7,500
	Castle Capital (15,000*2/8)	$3,750
	Sean Capital (15,000*2/8)	$3,750
	Conner Capital		$195,000
(C)	Cash	$240,000
	Jane Capital (30,000*4/8) Refer note 2		$15,000
	Castle Capital (30,000*2/8)		$7,500
	Sean Capital (30,000*2/8)		$7,500
	Conner Capital		$210,000