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After the tangible assets have been adjusted to current market prices, the capital accounts of...

Question:

After the tangible assets have been adjusted to current market prices, the capital accounts of Brad Paulson and Drew Webster have balances of $47,560 and $56,520, respectively. Austin Neel is to be admitted to the partnership, contributing $28,150 cash to the partnership, for which he is to receive an ownership equity of $32,900. All partners share equally in income.

Required:

A. On December 31, journalize the entry to record the admission of Neel, who is to receive a bonus of $4,750.

B. What are the capital balances of each partner after the admission of the new partner?

C. Why are tangible assets adjusted to current market prices, prior to admitting a new partner?

Capital Account :

Capital account means the balance of all the partners in the partnership during the year whatever amount of transaction is happened in the business will be recorded in the capital account.

Answer and Explanation: 1

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Journal entry
Accounts and Explanations Debit Credit
Cash Account $28,150

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The Basics of Partnerships: Types & Examples

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Chapter 5 / Lesson 8
20K

Learn about different types of partnership styles. See partnership business and company examples. Know about partnership agreements and when they dissolve.


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