The capital accounts of Robert Jewell and Donald Kane have balances of $60,000 and $80,000 respectively....

The capital accounts of Robert Jewell and Donald Kane have balances of $60,000 and $80,000 respectively. James Abbey and George Bowman are to be admitted to the partnership. Abbey purchases one-third of Jewell's interest for $25,000 and one-fifth of Kane's interest for $20,000. Bowman contributes $40,000 cash to the partnership, for which he is to receive an ownership equity of $40,000.

INSTRUCTIONS: (a) Present the entries in general journal form to record the admission to the partnership of (1) Abbey and (2) Bowman.

(b) What are the capital balances of each partner after Abbey and Bowman have been admitted as partners?

Expert Solution

a. Journal entries to record the admission to the partnership of

1. Abbey

	Jewell's Capital	$20,000
	Kane's Capital	$16,000
	Abbey's Capital		$36,000
	(to record admission of Abbey)

	1/3rd Jewell's interest
	(60000 x 1/3)	$20,000
	1/5 Kane's interest
	(80000 x 1/5)	$16,000

	For the purpose of accounting, we have to take the book values of the transferred
	interest. Jewell and kane both sold their interest at profit, but all this is their personal
	transaction and not relevent from accounting purpose.

2. Bowman

	Cash	$40,000
	Bowman's Capital		$40,000
	(To record admission of Bowman)

b. Capital balances of each partner after Abbey and Bowman have been admitted as partners

	Jewell	$40,000	(60000-20000)
	Kane	$64,000	(80000-16000)
	Abbey	$36,000	(20000+16000)
	Bowman	$40,000

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