Question

Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would includea. a credit to John's capital for $40,000 and a credit to Stuart's capital for $10,000. b. a credit to Stuart's capital for $10,000.c. a credit John's capital for $50,000. d. a credit to John's capital for $40,000.

Answer 1

Answer:

The correct answer is A

Explanation:

The journal entry for the admission of new a partner is as:

Cash A/c..........................Dr     $50,000

    John's capital A/c...........Cr   $40,000

    Stuart's capital A/c...........Cr   $10,000

As the Bobbi sells the interest in the partnership to John for $50,000. But Bobbi has partnership capital of $40,000. So, remaining $10,000 will be taken from the Stuart's capital.

As cash is increasing with the admission of partner and any increase in cash is debited. Therefore, the cash account is debited. And the cash is increasing against the Capital of John and Stuart. So, there account are credited.