A condensed balance sheet for the Pet, Qua, and She partnership at December 31, 2016, and their
Question:
On January 1, 2017, the partners decided to bring Tom into the partnership for a one-fourth interest in the capital and profits of the partnership. The following proposals for Tom's admittance into the partnership were considered:
1. Tom would purchase one-half of Pet's capital and right to future profits directly from Pet for $60,000.
2. Tom would purchase one-fourth of each partner's capital and rights to future profits by paying a total of $45,000 directly to the partners.
3. Tom would invest $55,000 cash in the partnership for a 25 percent interest in capital. Future profits would be divided 37.5 percent, 22.5 percent, 15 percent, and 25 percent for Pet, Qua, She, and Tom, respectively.
REQUIRED:
Prepare journal entries with supporting computations to show Tom's admittance into the partnership under each of the given proposals assuming that:
1. Partnership net assets are not to be revalued.
2. Partnership net assets are to be revalued.
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...
Step by Step Answer:
Advanced Accounting
ISBN: 978-0134472140
13th edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith