Question

Disney Partners is run by Mickey and Goofy. Mickey has $100,000 in capital while Goofy has $75,000 in capital.

Donald wants to join the partnership and offers $90,000 for a 1/3 ownership interest

Make the appropriate journal entry to admit Donald:

Assume instead Donald only offers $40,000; make the new appropriate journal entry

Answer 1

Solution 1:

Total partnership capital after admission of Donald = $175,000 + $90,000 = $265,000

Donald share in Partnership = 33.33%

Therefore required share of capital by Donald = 265,000 * 33.3333% = $88,333

Bonus Capital introduced by Donald = $90,000 - $88,333 = $1,667

Bonus capital will be distributed in Mickey and Goofey in ration of 1:1

Journal Entries - Disney partners
S. No.	Particulars	Debit	Credit
1	Cash Dr	$90,000.00
	To Donald's Capital		$88,333.00
	To Mickey's Capital		$834.00
	To Goofey's Capital		$833.00
	(Being capital introduced by new partner)

Solution 2:

Total partnership capital after admission of Donald = $175,000 + $40,000 = $215,000

Donald share in Partnership = 33.33%

Therefore required share of capital by Donald = 215,000 * 33.3333% = $71,667

Capital contribution by donald = $40,000

Deficiency of $31,667 will be covered by existing partners.

Journal Entries - Disney partners
S. No.	Particulars	Debit	Credit
1	Cash Dr	$40,000
	Mickey's capital Dr	$15,834
	Goofey's capital Dr	$15,833
	To Donald's Capital		$71,667
	(Being capital introduced by new partner)