Serial Problem Business Solutions LO P3 At the start of 2016, Santana Rey is con

Question

Serial Problem Business Solutions LO P3 At the start of 2016, Santana Rey is considering adding a partner to her business. She envisions the new partner taking the lead in generating sales of both services and merchandise for Business Solutions. S. Rey's equry in Business Solutions Is reflected in the following capital balance as of January 1, 201 Required: 2 Prepare the January 1, 2016, journal entries necessary to admit a new partner to Business Solutions through the purchase of a partnershlp interest for each of the following two separate cases: (a) 11 sharing agreement and (b) 41 sharing agreement Record the admission of a new partner at a 1:1 ownership interest. 1 2 Record the admission of a new partner at a 4:1 ownership interest.

Explanation / Answer

1- calculation of capital introduced by new Partner-

If the share of new partner is 50% then existing partner will be left with 50% share which will be equal to 80580. Now we can calculate capital introduced by new partner

Total capital = 80580/50%= 161160

Share of new partner= 161160-80580= 80580

Cash a/c Dr. 80580

To capital a/c (new partner) 80580

2.- share is 4:1

Now part of existing partner is 20% so

Total capital- 80580/80%= 100725

Capital of new partner= 100725-80580= 20145

Cash a/c Dr. 20145

To capital a/c 20145

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