The Prince-Robbins partnership has the following capital account balances on Jan

Question

The Prince-Robbins partnership has the following capital account balances on January 1, 2018:

Prince is allocated 60 percent of all profits and losses with the remaining 40 percent assigned to Robbins after interest of 8 percent is given to each partner based on beginning capital balances.

On January 2, 2018, Jeffrey invests $31,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 8 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2018, the partnership reports a net income of $12,000.

Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018.

Determine the allocation of income at the end of 2018.

Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

Record the entry for goodwill allocation, during the admission of a new partner.

Note: Enter debits before credits.

Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

Record the cash received from new partner.

Note: Enter debits before credits.

Required B

Determine the allocation of income at the end of 2018.

Explanation / Answer

1)Record the entry for goodwill allocation, during the admission of a new partner. Transaction General Journal Debit Credit 1 Goodwill $14,000.00 Prince, Capital ($14000 x 60%) $8,400.00 Robbins , Capital ($14000 x 40%) $5,600.00 Implied value of the business based on the new investment = $31000 /20% $155,000.00 Total capital after investment ($60,000 + $50,000 + $31,000) $141,000.00 Goodwill $14,000.00 2)Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the cash received from new partner. Transaction General Journal Debit Credit 2) Cash $31,000.00 ?Jeffrey, Capital $31,000.00 Required B Determine the allocation of income at the end of 2018. Prince Robbins Jeffrey Total Interest 8% of Beginning capital:(see below) $5,472.00 $4,448.00 $2,480.00 $12,400.00 Remaining Loss (50%: 30% :20% ) of $400 -$200.00 -$120.00 -$80.00 -$400.00 Income Allocation $5,272.00 $4,328.00 $2,400.00 $12,000.00 Prince Robbins Jeffrey Beginning Capital $60,000.00 $50,000.00 $31,000.00 Goodwill Allocation $8,400.00 $5,600.00 Total $68,400.00 $55,600.00 $31,000.00 Interest 8% $5,472.00 $4,448.00 $2,480.00 Prince Remaining Loss ($12000-$5472-$4448-$2480) -$400.00

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.