Reference no: EM133166932
Question - Admission journal entries: At April 30, partners' capital balances in the ELM Company are as follows: V. Easi, $49,000; K. Lester, $24,000; and W. Matt, $17,000. The income-sharing ratios are 3:2:1, respectively. On May 1, the ELMO Company is formed by admitting N. Ortiz to the firm as a partner.
Journalize the admission of Ortiz under each of the following assumptions. SHOW your calculations!
1. Ortiz purchases 50% of Matt's ownership interest by paying Matt $9,000 cash.
2. Ortiz purchases 50% of Lester's ownership interest by paying Lester $16,000 cash.
3. Ortiz invests $35,000 cash in the partnership for a 40% ownership interest that includes a bonus to the new partner.
4. Ortiz invests $30,000 in the partnership for a 15% ownership interest. Bonuses are given to the old partners.
Withdrawal journal entries:
On December 31, the capital balances and income ratios in the ART Company are as follows:
|
Partner
|
Capital Balance
|
Income Ratio
|
|
E. Atlas
|
$70,000
|
60%
|
|
P. Ross
|
$30,000
|
30%
|
|
L. Tower
|
$21,500
|
10%
|
Journalize the withdrawal of Tower under each of the following assumptions. SHOW your calculations!
(HINT: Once Tower leaves the partnership, the income sharing ratio does not equal 100%):
1. Each of the remaining partners agrees to pay $12,000 cash from personal funds to purchase Tower's ownership equity. Each receives 50% of Tower's equity.
2. Ross agrees to purchase Tower's ownership interest for $18,000 cash.
3. From partnership assets, Tower is paid $29,000, which includes a bonus to him.
4. Tower is paid $17,000 from partnership assets, and bonuses to the remaining partners are recognized.