The capital accounts of Aaron Garner and Ricardo Fernandez have balances of $180,000 and $120,000, respectively. Aisha Carpenter and Isabel Diaz

The capital accounts of Aaron Garner and Ricardo Fernandez have balances of $180,000 and $120,000, respectively. Aisha Carpenter and Isabel Diaz are to be admitted to the partnership. Carpenter buys one-fifth of Garner’s interest for $50,000 and one-fourth of Fernandez’s interest for $32,000. Diaz contributes $90,000 cash to the partnership, for which she is to receive an ownership equity of $90,000.

a. Journalize the entries to record the admission of (1) Carpenter and (2) Diaz.
b. What are the capital balances of each partner after the admission of the new partners?


Answer:














a. (1) Aaron Garner, Capital (20% × $180,000) 36,000
Ricardo Fernandez, Capital (25% × $120,000) 30,000
Aisha Carpenter, Capital 66,000
(2) Cash 90,000
Isabel Diaz, Capital 90,000

b. Aaron Garner, Capital ($180,000 – $36,000)…………… $144,000
Ricardo Fernandez, Capital ($120,000 – $30,000)…… 90,000
Aisha Carpenter……………………………………………… 66,000
Isabel Diaz…………………………………………………… 90,000



May Cheng and Hannah Webster are partners who share in the income equally and have capital balances of $207,000 and $62,500, respectively. Cheng, with the consent of Webster, sells one-third of her interest to Michael Cross. What entry is required by the partnership if the sales price is (a) $60,000? (b) $80,000?


Answer:









a. and b.
May Cheng, Capital 69,000
Michael Cross, Capital 69,000
$207,000 × 1/3.
Note: The sale to Cross is not a transaction of the partnership, so the sales
price is not considered in this journal entry.