Joey and Rachel are partners whose capital balances are $400,000 and $300,000 and who share profits 3.2. Due to a shortage of cash, Joey and Rachel agree to admit Ross to the firm.

Required:

Prepare the journal entries required to record Ross's admission under each of the following assumptions:

(a) Ross invests $200,000 for a 1/4 interest. The total firm capital is to be $900,000.

(b) Ross invests $300.000 for a 1/4 interest. Goodwill is to be recorded.

(c) Ross invests $150.000 for a 1/5 interest. Goodwill is to be recorded.

(d) Ross purchases a 1/4 interest in the firm, with 1/4 of the capital of each old partner transferred to the account of the new partner_ Ross pays the partners cash of 5250.000, which they divide between themselves.

Transcribed Image Text:

A. Cash Joey, Capital Rachel, Capital Ross, Capital B. Implied goodwill = Goodwill = Goodwill Joey, Capital Rachel, Capital C. Implied goodwill = Goodwill = Goodwill Cash Ross, Capital D. Joey, Capital Rachel, Capital Ross, Capital Debit Credit A. Cash Joey, Capital Rachel, Capital Ross, Capital B. Implied goodwill = Goodwill = Goodwill Joey, Capital Rachel, Capital C. Implied goodwill = Goodwill = Goodwill Cash Ross, Capital D. Joey, Capital Rachel, Capital Ross, Capital Debit Credit

Answer rating: 100% (QA)

A Debit Credit Cash AC 900000 Joey Capital 400000 Rachel Capital 300000 Ross Capital 200000 B Impl... View the full answer