Question

The following information applies to the questions displayed below.]

Meir, Benson, and Lau are partners and share income and loss in a 3:2:5 ratio (in percents: Meir, 30%; Benson, 20%; and Lau, 50%). The partnership's capital balances are as follows: Meir, $73,000; Benson, $49,000; and Lau, $128,000. Benson decides to withdraw from the partnership.

2. Assume that Benson does not retire from the partnership described in Part 1. Instead, Rhode is admitted to the partnership on February 1 with a 25% equity. Prepare journal entries to record Rhode’s entry into the partnership under each separate assumption: Rhode invests (a) $83,333; (b) $60,833; and (c) $109,166. (Do not round your intermediate calculations.)

Answer 1

2	Ref.	Account titles and explanation					Debit	Credit
	a.	Cash					83333
		Rhode's capital						83333
		(Note:1)
		(To record Rhode's admission and bonus)
	b.	Cash					60833
		Meir's capital					5062.5
		Benson's capital					3375
		Lau's capital					8437.5
		Rhode's capital						77708
		(Note:2)
		(To record Rhode's admission and bonus)
	c.	Cash					109166
		Meir's capital						5812.2
		Benson's capital						3874.8
		Lau's capital						9687
		Rhode's capital						89792
		(Note:3)
		(To record Rhode's admission and bonus)
	Note:1
	Total equity=Total of old partner's capital+Contribution by new partner=73000+49000+128000+83333=$ 333333
	Share of Rhode in Equity=Total equity*25%=333333*25%=$ 83333
	Bonus received (paid) by new partner=Cash paid by new partner-Share in equity=83333-83333=0
	Note:2
	Total equity=Total of old partner's capital+Contribution by new partner=73000+49000+128000+60833=$ 310833
	Share of Rhode in Equity=Total equity*25%=310833*25%=$ 77708
	Bonus received (paid) to new partner=Cash paid by new partner-Share in equity=60833-77708=$ -16875
	Bonus to be paid by old partners in the ratio 3:2:5
	Meir	16875*3/10		5062.5
	Benson	16875*2/10		3375
	Lau	16875*5/10		8437.5
	Note:3
	Total equity=Total of old partner's capital+Contribution by new partner=73000+49000+128000+109166=$ 359166
	Share of Rhode in Equity=Total equity*25%=359166*25%=$ 89792
	Bonus received (paid) by old partners=Cash paid by new partner-Share in equity=109166-89792=$ 19374
	Bonus to be received by old partners in the ratio 3:2:5
	Meir	19374*3/10		5812.2
	Benson	19374*2/10		3874.8
	Lau	19374*5/10		9687
	I appreciate your ratings