After the partnership has been operating for a year, the Capital accounts of Bob
ID: 3419901 • Letter: A
Question
After the partnership has been operating for a year, the Capital accounts of Bob and Kim are $15,000 and $10,000, respectively. Sonia buys a one-fourth interest in the partnership by investing cash of $5,000. What will be the Capital account balances of the partners in the new Bob, Kim, and Sonia partnership, assuming that the new partner receives a bonus and that Bob and Kim share income and losses equally? Prepare the entry in journal form to record the transfer of ownership on the partnership books.
Explanation / Answer
Inclusion of new partner--
Bob capital account = $15,000
Kim capital account = $10,000
Sonia's invest =$ 5,000
Total capital invested = $30,000
Sonia's interest (1/4th) = 25% of 30,000=$7500
Book value acquired = $6,000
so, the journal inclusion for the admission of the partner will be (here the bonus is for new partner)--
DATE Particulars L/F Dr $ Cr$ cash 5000 Bob capital( 50 % of 1000) 500 Kim capital(50% of 1000) 500 Sonia capital 6000