Question

In: Accounting

The Distance Plus partnership has the following capital balances at the beginning of the current year:...

The Distance Plus partnership has the following capital balances at the beginning of the current year:

Tiger (50% of profits and losses) $ 85,000
Phil (30%) 60,000
Ernie (20%) 55,000

Each of the following questions should be viewed independently.

If Sergio invests $100,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the bonus method is used.

If Sergio invests $60,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the bonus method is used.

If Sergio invests $72,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the goodwill method is used.

Solutions

Expert Solution

If Sergio invests $100,000 in cash in the business for a 25 percent interest:

Tiger 50% $    85,000.00
Phil 30% $    60,000.00
Ernie 20% $    55,000.00
$ 200,000.00
Sergio Investment $ 100,000.00
Total Capital $ 300,000.00
25% (Sergio Capital) $    75,000.00
Bonus to be shared to existing partners $    25,000.00

Journal Entry

Debit Credit
Cash $ 100,000.00
Tiger Capital $ 12,500.00
Phil Capital $    7,500.00
Ernie Capital $    5,000.00
Sergio Capital $ 75,000.00

If Sergio invests $60,000 in cash in the business for a 25 percent interest

Tiger 50% $    85,000.00
Phil 30% $    60,000.00
Ernie 20% $    55,000.00
$ 200,000.00
Sergio Investment $    60,000.00
Total Capital $ 260,000.00
Sergio Capital $    65,000.00
Bonus to be taken from existing partners $      5,000.00

Journal Entry

Debit Credit
Cash $    60,000.00
Tiger Capital $      2,500.00
Phil Capital $      1,500.00
Ernie Capital $      1,000.00
Sergio Capital $ 65,000.00

If Sergio invests $72,000 in cash in the business for a 25 percent interest

Tiger 50% $    85,000.00
Phil 30% $    60,000.00
Ernie 20% $    55,000.00
$ 200,000.00
Sergio Investment $    72,000.00
Total Capital $ 272,000.00
Implied Value(72000/25%) $ 288,000.00
Goodwill $    16,000.00

Journal Entry

Debit Credit
Goodwill $    16,000.00
Tiger Capital $    8,000.00
Phil Capital $    4,800.00
Ernie Capital $    3,200.00
Debit Credit
Cash $    72,000.00
Sergio Capital $ 72,000.00

Related Solutions

The Distance Plus partnership has the following capital balances at the beginning of the current year:...
The Distance Plus partnership has the following capital balances at the beginning of the current year: Tiger (40% of profits and losses) $ 125,000 Phil (20%) 95,000 Ernie (40%) 110,000 Each of the following questions should be viewed independently. A.If Sergio invests $150,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. B. If Sergio invests $140,000 in cash in the business for a 30 percent interest,...
The Distance Plus partnership has the following capital balances at the beginning of the current year:...
The Distance Plus partnership has the following capital balances at the beginning of the current year:   Tiger (50% of profits and losses) $ 70,000   Phil (40%) 40,000   Ernie (10%) 55,000 If Sergio invests $60,000 in cash in the business for a 20 percent interest, what journal entry is recorded? Assume that the goodwill method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
The Distance Plus partnership has the following capital balances at the beginning of the current year:...
The Distance Plus partnership has the following capital balances at the beginning of the current year: Tiger (40% of profits and losses) $ 80,000 Phil (40%) 50,000 Ernie (20%) 65,000 Each of the following questions should be viewed independently. A. If Sergio invests $100,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. (If no entry is required for a transaction/event, select "No journal entry required" in...
The Distance Plus partnership has the following capital balances at the beginning of the current year:...
The Distance Plus partnership has the following capital balances at the beginning of the current year: Tiger (50% of profits and losses) $ 100,000 Phil (40%) 70,000 Ernie (10%) 85,000 Each of the following questions should be viewed independently. If Sergio invests $100,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the bonus method is used. 1. Record the admission of new partner under bonus method. If Sergio invests $80,000 in...
The Distance Plus partnership has the following capital balances at the beginning of the current year:...
The Distance Plus partnership has the following capital balances at the beginning of the current year: Tiger (50% of profits and losses) $ 175,000 Phil (30%) 145,000 Ernie (20%) 160,000 Each of the following questions should be viewed independently. a. If Sergio invests $190,000 in cash in the business for a 25 percent interest, what journal entry is recorded? Assume that the bonus method is used b. If Sergio invests $150,000 in cash in the business for a 25 percent...
The E.N.D. partnership has the following capital balances as of the end of the current year....
The E.N.D. partnership has the following capital balances as of the end of the current year. Pineda $ 140,000Adams 120,000Fergie 110.000Gomez 100.000 Total capital  $470,000Answer each of the following independent questions:a. Assume that the partners share profits and losses 3.3.2.2, respectively. Fergie retires and is paid $140,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? b. Assume that the partners share profits and losses 4.3:2:1, respectively Pineda retires and is...
The E.N.D. partnership has the following capital balances as of the end of the current year:...
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 310,000 Adams 280,000 Fergie 270,000 Gomez 260,000 Total capital $ 1,120,000 Answer each of the following independent questions: Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $312,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? Assume that the...
The E.N.D. partnership has the following capital balances as of the end of the current year:...
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 290,000 Adams 260,000 Fergie 250,000 Gomez 240,000 Total capital $ 1,040,000 Answer each of the following independent questions: a. Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $280,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? b. Assume...
The E.N.D. partnership has the following capital balances as of the end of the current year:...
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 310,000 Adams 270,000 Fergie 240,000 Gomez 220,000 Total capital $ 1,040,000 Answer each of the following independent questions: Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $285,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? Assume that the...
The E.N.D. partnership has the following capital balances as of the end of the current year:...
The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda $ 210,000 Adams 190,000 Fergie 180,000 Gomez 170,000 Total capital $ 750,000 Answer each of the following independent questions: Assume that the partners share profits and losses 3:3:2:2, respectively. Fergie retires and is paid $211,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital balance of the remaining three partners? Assume that the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT