Meir, Benson, and Lau are partners and share income and loss in a 2:3:5 ratio. T
ID: 2328330 • Letter: M
Question
Meir, Benson, and Lau are partners and share income and loss in a 2:3:5 ratio. The partnership's capital balances are as follows: Meir, $68,000; Benson, $104,000; and Lau, $178,000. Benson decides to withdraw from the partnership, and the partners agree not to have the assets revalued upon Benson's retirement. 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 of the following separate assumptions: Rhode invests (a) $116,667; (b) $85,167; and (c) $152,834. (Do not round your intermediate calculations.)
Explanation / Answer
Event Account titles and Explanation Debit Credit (a) Cash (Note:1) 116667 Rhode's Capital 116667 (Admission of Rhodes) (b) Cash (Note:2) 85167 Meir's Capital 4725 Benson's Capital 7087.5 Lau's Capital 11812.5 Rhode's Capital 108792 (Admission of Rhodes) © Cash (Note:3) 152834 Meir's Capital 5425.1 Benson's Capital 8137.65 Lau's Capital 13562.75 Rhode's Capital 125708.5 (Admission of Rhodes) Note: 1. Rhodo invests $ 116667 Total capital balance: Meir 68000 Benson 104000 Lau 178000 Rhode 116667 Total 466667 Stake of Rhode=466667*25%=$ 116667 Cash paid by Rhode=$ 116667 Hence, No bonus 2. Rhodo invests $ 85167 Total capital balance: Meir 68000 Benson 104000 Lau 178000 Rhode 85167 Total 435167 Stake of Rhode=435167*25%=$ 108792 Cash paid by Rhode=$ 85167 Hence, bonus available to New partner=108792-85167=$ 23625 Bonus is Paid by Old partner's at ther sharing ratio of 2:3:5 Meir 23625*2/10 4725 Benson 23625*3/10 7087.5 Lau 23625*5/10 11812.5 3. Rhodo invests $ 152834. Total capital balance: Meir 68000 Benson 104000 Lau 178000 Rhode 152834 Total 502834 Stake of Rhode=502834*25%=$ 125708.50 Cash paid by Rhode=$ 152834 Hence, bonus paid to Old partners=152834-125708.50=$ 27125.5 Bonus is Paid to Old partner's at ther sharing ratio of 2:3:5 Meir 27125.5*2/10 5425.1 Benson 27125.5*3/10 8137.65 Lau 27125.5*5/10 13562.75