Admitting New Partner With Bonus L. Bowers and V. Lipscomb are partners in Elega

Question

Admitting New Partner With Bonus L. Bowers and V. Lipscomb are partners in Elegant Event Consultants. Bowers and LUpscomb share income equally. M. Ortiz will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $7,000. The capital balances of each partner are $75,500 and $105,000, respectively, prior to the revaluation. a. Provide the journal entry for the asset revaluation. For a compound transaction, Iif an amount box does not require an entry, leave it blank L. Bowers, Capital V. L M. Ortiz, Capital b. Provide the journal entry for Ortiz's admission under the following independent situations: 1. Ortiz purchased a 20% interest for $38,000. For a compound transaction, if an amount box does not require an entry, leave it blank. 2. Ortiz purchased a 30% interest for $95,000. For a compound transaction, if an amount box does not require an entry. leave it blank Check My Work 3 more Check My Work uses remaining. PreviousNext All work saved. Save and Exit Submit Assignment for Grading 1 F6 F9 10

Explanation / Answer

a)

b)

1. Total Capital of the firm post admission of M.Ortiz = (75500 -3500) + (105000- 3500) + 38000

= 211500

M. Ortiz's share = 211500 * 20% = 42300

However, M. Ortiz has bought in only 38,000.

Deficiency of M. Ortiz's capital = 42300 - 38000 = 4300

Deficiency will be bought in by L.Bowers and V.Lipscomb in their profit sharing ratio.

Journal Entry :

2. Total Capital of the firm post admission of M.Ortiz = (75500 -3500) + (105000- 3500) + 95000

= 211500

M. Ortiz's share =268500  * 30% = 80550

However, M. Ortiz has bought in 95000

Excess of M. Ortiz's capital = 95000 - 80550 = 14450

Excess will be shared by L.Bowers and V.Lipscomb in their profit sharing ratio.

Journal Entry:

Account Titles and Explanation Debit Credit Revaluation Loss 7000 Equipment 7000 L,Bowers Capital 3500 V.lipscomb Capital 3500    Revaluation Loss 7000

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