3. Roy Reynolds and Mike Truesdale are partners. To expand the expertise of thei

Question

3. Roy Reynolds and Mike Truesdale are partners. To expand the expertise of
their business, they have agreed to admit Jennie Fellows to the partnership on
January 1, 2010. The capital account balances on January 1, 2010, after
revaluation of assets, are Reynolds $80,000 and Truesdale $60,000. Net income or
net loss is shared equally. On page 20 of a general journal, record the
admission of Fellows to the partnership on January 1, 2010 assuming that Fellows
invests $46,000 for 20 percent interest in the business. Omit the descriptions.
please show how u got the answer

Explanation / Answer

As this is a case of admission of a new partner who is investing into business & not buying the interests of existing partners, the Capital of existing partners remains intact. Journal entry will reflect the Cash brought in by new partner & is as below :- Jan 1, 2010 Cash Dr $46,000 Fellows Capital A/c Cr $46,000 Payment of interest of 20% will be recorded in terms of partnership & will be paid as & when due.

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