The partners consider that the book values of the partnership net assets are fairly representative of current market values. They have agreed to admit Earl into the partnership. Earl will invest $115,000 for a 20% interest in the capital.

Required:

(a) By means of journal entries, indicate the possible ways of recording the admission of Earl to the partnership.

(b) Evaluate each of the journal entries you have prepared.

(c) The partners decide to liquidate the business rather than admit Earl. Don received a total of $7,250 during the liquidation process, which is now complete. Calculate how much Allan, Bill, and Charles each received.

Transcribed Image Text:

The following balance sheet is for the partnership of Allen, Bill, Charles, and Don, who share profits in the ratio of 5:2:2:1. Assets Cash $ 90,000 Other assets 594,000 $684,000 Liabilities and capital Liabilities $184,000 Allen capital Bill capital Charles capital Don capital 300,000 90,000 60,000 50,000 $684,000 The following balance sheet is for the partnership of Allen, Bill, Charles, and Don, who share profits in the ratio of 5:2:2:1. Assets Cash $ 90,000 Other assets 594,000 $684,000 Liabilities and capital Liabilities $184,000 Allen capital Bill capital Charles capital Don capital 300,000 90,000 60,000 50,000 $684,000

Answer rating: 100% (QA)

BONUS METHOD UNADJUSTED BONUS ADJUSTED Allen capital 50 ... View the full answer