Prepare the journal entry to record Jeffrey entrance

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Question - The Prince-Robbins partnership has the following capital account balances on January 1, 2021:

Prince, Capital $125,000

Robbins, Capital 115,000

Prince is allocated 70 percent of all profits and losses with the remaining 30 percent assigned to Robbins after interest of 6 percent is given to each partner based on beginning capital balances.

On January 2, 2021, Jeffrey invests $70,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 6 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2021, the partnership reports a net income of $20,000.

Required -

1. Prepare the journal entry to record Jeffrey's entrance into the partnership on January 2, 2021.

2. Prepare a schedule showing how the 2021 net income allocation to the partners should be determined.

Reference no: EM133054112

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