Question

Healthy Mediciel, LLC, consists of two doctors, Anderson and Langston, who share in all income and losses according to a 2:3 income-sharing ratio. Dr. Leeser has been asked to join the LLC. Prior to admitting Leeser, the assets of Healthy Medical were revalued to reflect their current market values. The revaluation resulted in medical equipment being increased by $40,000. Prior to the revaluation, the equity balances for Anderson and Langston were $154,000 and $208,000, respectively.

a. Provide the journal entry for the asset revaluation. For a compound transaction, if an amount box does not require an entry, leave it blank.

b. Provide the journal entry for the bonus under the following independent situations:

1. Leeser purchased a 30% interest in Healthy Mediciel, LLC, for $228,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

2. Leeser purchased a 25% interest in Healthy Mediciel, LLC, for $124,000. For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

	Event	Account titles and Explanation			Debit	Credit
a.		Property,Plant and Equipment			40000
		Ansderson's capital		(40000*2/5)		16000
		Langston's capital		(40000*3/5)		24000
		(Asset revalued)
b.	1	Cash		(Note:1)	228000
		Ansderson's capital				15600
		Langston's capital				23400
		Leese's Capital				189000
		(Admission of Leese)
	2	Cash		(Note:2)	124000
		Ansderson's capital			3000
		Langston's capital			4500
		Leese's Capital				131500
		(Admission of Leese)
	Note:
	1. Leese invests $ 228000- 30% interest
	Total capital balance:
	Andeson	(154000+16000)		170000
	Langston	(208000+24000)		232000
	Leese			228000
	Total			630000
	Stake of Leese=630000*30%=$ 189000
	Cash paid by Rhode=$ 228000
	Hence, bonus paid to Old partners=228000-189000=$ 39000
	Bonus is Paid to Old partner's at ther sharing ratio of 2:3
	Andeson	39000*2/5	15600
	Langston	39000*3/5	23400
	2. Leese invests $ 124000 -25% interest
	Total capital balance:
	Andeson	(154000+16000)		170000
	Langston	(208000+24000)		232000
	Leese			124000
	Total			526000
	Stake of Leese=526000*25%=$ 131500
	Cash paid by Rhode=$ 124000
	Hence, bonus available to New partner=131500-124000=$ 7500
	Bonus is Paid by Old partner's at ther sharing ratio of 2:3
	Andeson	7500*2/5	3000
	Langston	7500*3/5	4500