Question

Accounting and Financial Reporting II

3. On June 30, a partnership has total partnership capital as follows: Partner #1, capital 100,000 Partner #2, capital 200,000 Total partnership capital 300,000 The partners allocate income and losses 40% to partner #1 and 60% to partner #2. On June 30, the partners agree to admit a new partner (partner #3) who pays $50,000 to the partnership for a 12% interest in the partnership. Prepare any necessary journal entries on the books of the partnership on June 30.

Answer 1

	Partner 1	Partner 2	Partner 3
Existing Profit Sharing ratio	40	60		100
New Revised profit sharing ratio	35.2	52.8	12	100
Existing capital	100000	200000		300000
Revised capital needed in the new revised profit sharing ratio	146667	220000	50000	416667
	35.2	52.8	12	100
Contribution required from each partner	46667	20000	50000	116667
					Amount in $
	Date	General Jounral			Debit	Credit
		Cash			116667
			Partner #1 capital			46667
			Partner #2 capital			20000
			Partner #3 capital			50000
		To record the additional capital brought in by partners in their revised profit sharing ratio