The ABCD Partnership has the following balance sheet at January 1, 2017, prior to the admission of new partner, Eden. Cash and current assets$39,000Liabilities$52,000Land 234,000Adams, capital 26,000Building and equipment 130,000Barnes, capital 52,000 Cordas, capital 117,000 Davis, capital 156,000Total$403,000Total$403,000?Eden acquired a 20% interest in the partnership by contributing a total of $71,500 directly to the other four partners. No goodwill is to be recorded. Profits and losses have previously been split according to the following percentages: Adams, 15%, Barnes, 35%, Cordas, 30%, and Davis, 20%. After Eden made his investment, what were the individual capital balances?
What will be an ideal response?
The partnership's total net assets are still $351,000, because Eden's $71,500 went to the partners. Using the book value method, each of the original partners will give up 20% of their current capital balance to Eden. The journal entry is:
| Adams, Capital | 5,200 | |
| Barnes, Capital | 10,400 | |
| Cordas, Capital | 23,400 | |
| Davis, Capital | 31,200 | |
| Eden, Capital | 70,200 | |
? | ||
| ? | ||
| The partners' balances following the admission of Eden are: | ||
| ? | ||
| Adams, Capital | $ | 20,800 |
| Barnes, Capital | 41,600 | |
| Cordas, Capital | 93,600 | |
| Davis, Capital | 124,800 | |
| Eden, Capital | 70,200 | |
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