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uake a rest-parthiv patel ×? Take Albert And Jason Admit Marth x) https%3a%2t%2tsa annamech backboard com a e . ? https: /www mat x .co Twitch-Savannah Tech BL- H Netflix D savannah Technica ecure Student/PlayerTest.aspx?te profile, ur ::: Apps rstc email m2fap %2t s ?!mx2r file & ? y Twitter OLogin?YouTube . WrATHERCHANNE D wel me to aveo.i ACCT 1105 CRN 60354 (1) parthiv patel & I 6/30/18 10:10 PM Quiz: Chapter 12 Qu Submit Qu This Question: 1 pt 47 of 20 (6 complete) This Quiz: 20 pts possib Lloyd and Jack admit Molly to their partnership, with Molly paying $62,000 more than the book value of her equity in the new does admitting Molly to the partnership have on the capital balances of Lloyd and Jack? business. Lloyd and Jack have no formal profit-and-loss-sharing agreement What effect O A. Debit the Lloyd and Jack capital accounts for $31,000 each. B. Credit the Lloyd and Jack capital accounts for S62.000 each. O C. Credit the Lloyd and Jack capital accounts for $31,000 each. D. Cannot be determined because there's no profit-and-loss sharing ratio. Click to select your answer 59 20 888 F esc

Explanation / Answer

Correct Answer (c ) Credit Lloyd and jack’s Capital accounts for $ 31000 each.

Explanation

When a partner is admitted into a partnership then he brings his share of capital and in addition to that he also brings some extra amount which is treated as premium.

This Extra Amount is distributed to Existing Partners in their sacrificing Ratio. Since in the given question the profit sharing ratio is not available it is assumed to be 50-50. When the profit sharing ratio is equal then the sacrificing ratio is also the same for all the partners. When new partner Molly is admitted, she gets 1/3 of profit. Lloyd and Jack have sacrificed their share equally and that is why the premium brought by molly is distributed to their capital equally.

Crediting Lloyd and Jack’s Capital Accounts will increase their capital in partnership by $31000 each.

Reason for not selecting Option (A) Debiting the accounts of partners with $31000 each would reduce their capital which would be incorrect.

Reason for not selecting Option (B) Crediting each partner’s account with $62000 would be incorrect as partners only get their share of premium.

Reason for not selecting Option (C ) When profit sharing ratio is not given then it is assumed that profit sharing ratio is equal so admission is possible.

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