Accounting Principles, (Custom Bronx Community College Edition) Help I ment PRIN

Question

Accounting Principles, (Custom Bronx Community College Edition) Help I ment PRINTER VERSION BACK NEXT ercise 12-12 (Part Level Submission) S. Pagan and T. Tabor share income on a 7:3 basis. They have capital balances of $106,000 and $60,000, respectively when W. Wolford is admitted to the partnership. Prepare the journal entry to record the admission of W. Wolford under each of the following assumptions. (a) [2 Your answer is partially correct. Try again. Investment of $93,000 cash for a 30% ownership interest with bonuses to the existing partners. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Cash 93,000 W. Wolford, Capital T. Tabor, Capital 2,960 30,2 sHoW SOLUTION SHOW ANSWER TEXT Attempts: 3 of 3 used Version 4.24 Policy I 2000-201B

Explanation / Answer

Here, the goodwill is hidden and we have to determine the goodwill of the firm

93000*10/3 - (106000-60000-48000)

310000-106000-60000-48000

Goodwill = 96000

Share of goodwill of wolford is = 96000*0.30 = 28800

The same is distrubuted to existing partners in sacrificing ratio.

7/10*7/10-7/10= 3/10*7/10= 21/100

3/10*7/10-3/10= 3/10*3/10= 9/100

Sacrificing ratio= 7:3

Cash a/c . Dr 93000

To wolford capital a/c . 64200 (93000-28800)

To pagan capital. A/c 20160 (28800*7/10)

To tabor capital . A/c. 8640. (28800*3/10)

2. Bonus to new patner

Total capital = 106000+48000+60000 = 214000

Capital of wolford is 214000*3/10 = 64200

Bonus to new partner = 64200-48000= 16200

The same is to be shared in old profit sharing ratio

Cash a/c . Dr 48000

Pagan's capital a/c . Dr. 11340 (16200*7/10)

Tabon's . Capital a/c. Dr. 4860 (16200*3/10)

To wolford capital a/c. 64200

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