Question

Jim and Joe are partners agreeing to share profits and losses in a​ 2:6 ratio, respectively....

Jim and Joe are partners agreeing to share profits and losses in a​ 2:6 ratio, respectively. Business has been profitable and they have decided to admit Jewel to the partnership for a cash investment. The balances in Jim and​ Joe's capital accounts are presently $ 240000 and $ 260000​, respectively. If Jewel is given a​ 25% interest in the partnership in exchange for $ 200000​, the entry to record her investment includes a​ _______.

A.credit to​ Jewel, Capital for$200,000

B.debit to​ Joe, Capital for $ 18750

C.credit to​ Jim, Capital for $ 6250

D.debit to​ Jewel, Capital for $175,000

Business   Accounting   
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Answer #1

Determination of Jewel's equity :

Bonus to other partners = $200,000 - $175,000 = $25,000

Recording of Journal entry :

Therefore, Option C is correct. (credit to​ Jim, Capital for $ 6250)

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