P12-358 Pike, Quinn, and Reed are considering adding Shipp as a new partner. On

Question

P12-358 Pike, Quinn, and Reed are considering adding Shipp as a new partner. On March 31 of the current year, the capital accounts of the three exist ing partmers and their shares of profits and losses are as follows Capital S 50,000 Profit-and-Loss % 20% 30% 50% Pike inn 100,000 150,000 Requirements Journalize the admission of Shipp as a partner on March 31 for each of the following independent situations 1. Shipp pays Reed $200,000 cash to purchase Reed's interest in the partnership. (pp. 603-605) interest in the business. (pp. 605-606) interest in the business. (pp. 607-608) 2Shipp invests $100,000 in the partnership, acquiring a one-fourth .Shipp invests $80,000 in the partnership, acquiring a one-fourth

Explanation / Answer

1. The new partner Shipp pays to Reed and acquires his share. Therefore there will not be any change in the capital's of the partners . the only change will be that Reed will be replaced by Shipp. The journa entry will be

The gain or loss on the admission is for Reed personally, and the partnership is not affected.

2.

Working:

3.

Working:

Account Debit Credit Reed, Capital $150,000 Shipp, Capital $150,000

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