Question

Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement: Merchandise inventory recorded in the partnership accounts at $62,500 is to be revalued at its current replacement price of $68,500. Ben invested $48,000 in cash for a 30% interest in the partnership, which has total net assets (assets minus liabilities) of $130,000 that includes the inventory revaluation and the cash invested by Ben. The income-sharing ratio of Derek, Hailey, and Ben is to be 2:1:1. Required: a. Journalize the entries to record (1) the revaluation of merchandise inventory, and (2) the admission of Ben to the partnership. If an amount box does not require an entry, leave it blank. (1) (2) b. A few years later, the capital balances of Derek, Hailey, and Ben were $150,000, $90,000, and $55,000, respectively. At this time, Kacy is admitted to the partnership by the purchase of one-half of Derek's interest for $80,000. Journalize the entry to record the admission of Kacy to the partnership.

Answer 1

Answer:

(a)

merchandise inventory 6000(DR)

Derek Capital 4000(CR)

hailey Capital 2000(CR)

cash 48000(DR)

Ben capital 130000*30% 39000(CR)

Hailey, Capital (48000-39000)*1/3 3000(CR)

Derek, Capital (48000-39000)*2/3 6000(CR)

(b) DR CR

Derek, Capital 75000(DR)

Kacy, Capital 75000(CR)

1/2 of 150000 = 75000

Answer 2

Answer:

Explanation:

                                                      DR           CR

a merchandise inventory                6000  

       Derek Capital                                                  4000

        hailey Capital                                          2000

     

             cash                                          48000  

    Ben capital 130000*30%                                39000

    Hailey, Capital (48000-39000)*1/3                 3000

    Derek, Capital (48000-39000)*2/3                 6000

B

                                  DR          CR

Derek, Capital 75000  

Kacy, Capital                      75000

1/2 of 150000 =75000