The Distance Plus partnership has the following capital balances at the beginning of the current year:
| Tiger (40% of profits and losses) | $ | 170,000 |
| Phil (40%) | 140,000 | |
| Ernie (20%) |
155,000 |
|
Each of the following questions should be viewed independently. |
| a. |
If Sergio invests $210,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.) |
- Record the admission of new partner under bonus method.
Transaction General Entry Debit Credit
| b. |
If Sergio invests $175,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the bonus method is used. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.) |
- Record the admission of new partner under bonus method.
Transaction General Entry Debit Credit
| c. |
If Sergio invests $204,000 in cash in the business for a 30 percent interest, what journal entry is recorded? Assume that the goodwill method is used. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.) |
- Record the entry for goodwill allocation, during the admission of a new partner.
- Record the investment made by the new partner in the business.
- Transaction General Entry DebitCredit
