After the tangible assets have been adjusted to current market prices, the capit
ID: 2518425 • Letter: A
Question
After the tangible assets have been adjusted to current market prices, the capital accounts of Cecil Jacobs and Maria Estaban have balances of $61,000 and $59,000 respectively. Lee White is to be admitted to the partnership, contributing $45,000 cash to the partnership, for which she is to received and ownership of $55,000. All partners share equally in income. a. Journalize the admission of White, who is to receive a bonus of $10,000. b. What are the capital balances of each partner after admission of the new partner?Explanation / Answer
Solution 1a:
Bonus of $10,000 given to white will be shared by remaining partners in their profit sharing ratio i.e. 1:1
Solution 1b:
Capital balance of each partner after admission:
Cecil Jacob's Capital = $61,000 - $5,000 = $56,000
Maria Estaban Capital = $59,000 - $5,000 = $54,000
Lee White's Capital = $55,000
Solution 2:
If Duncan is personally bankrupt then debit balance of Duncan capital will be shared by Tribe and Ho in their profit sharing ratio.
Cash received by Tribe = $50,000 - ($15,000 * 2/3) = $40,000
Cash received by Ho = $40,000 - ($15,000*1/3) = $35,000
Journal Entries Particulars Debit Credit Cash Dr $45,000.00 Cecil Jacob's Capital Dr $5,000.00 Maria Estaban Capital Dr $5,000.00 To Lee White's Capital $55,000.00 (To record admission of new partner)