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 contributes $49,000 into the partnership for a 25% interest. The four original partners share profits and losses equally. Using the bonus method, determine the balances for each of the five partners after Eden joins the partnership.
What will be an ideal response?
Eden's contribution of $49,000 into the partnership raises the total partnership net assets to $400,000. Eden's capital account is credited, by agreement, for 25% of the partnership's total tangible assets, or $100,000. The $51,000 bonus to Eden is allocated in the original ¼ interest from each existing partner.
The journal entry to record the admission of Eden is:
| Cash | 49,000 | |
| Adams, Capital | 12,750 | |
| Barnes, Capital | 12,750 | |
| Cordas, Capital | 12,750 | |
| Davis, Capital | 12,750 | |
| Eden, Capital | 100,000 | |
? | ||
| ? | ||
| The capital balances of each of the five partners after Eden's entry into the partnership are as follows: | ||
| ? | ||
| Adams, Capital | $ | 13,250 |
| Barnes, Capital | $ | 39,250 |
| Cordas, Capital | $ | 104,250 |
| Davis, Capital | $ | 143,250 |
| Eden, Capital | $ | 100,000 |
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